- European stocks are the cheapest they’ve ever been compared with their US peers, according to Citigroup Inc. strategists who have adjusted their global asset allocation to reflect this view.
- The team led by Beata Manthey raised Europe to overweight while downgrading US equities to neutral. “Europe is once again trading at a record discount, and should benefit from a weaker dollar and any stimulus out of China,” the Citi strategists wrote in a note on Monday.
Why it matters
US stocks rose this year, while European stocks stumbled on fears of an uneven recovery in China and the negative impact of high interest rates on stocks. Chinese inflation data released today, Monday, reinforced concerns about the risks of the country's economy slipping into deflation, while speculation about Beijing's adoption of economic stimulus measures increased. Citigroup strategists also raised their recommendation for emerging market stocks to "buy," while reducing their recommendation for British stocks to "neutral." This reflects the lack of exposure of the London Stock Exchange to growth stocks and its continued negative impact on the strength of the pound sterling.
