European equities set to outperform U.S. in the next decade, says J.P. Morgan

John Bilton from J.P. Morgan Asset Management has forecasted that European stocks are poised to outperform their U.S. counterparts over the next 10-15 years. The prediction is based on factors such as an overvalued dollar, more attractive starting valuations, and higher overseas dividends.

Last year, the U.S market despite having its largest period of outperformance since 1971 with a 277% lead over 14 years, experienced a stumble due to rapid inflation and surging interest rates. In contrast, the Euro STOXX 50 has seen a growth of 14% over the past year, surpassing the performance of both the S&P 500‘s 10% and Dow Jones Industrial Average‘s 4.4%.

Bilton suggests that dollar-based investors should consider diversifying their portfolios by incorporating international stocks, which could potentially enhance returns. He anticipates an average annual return of 8% for euro area equities over the next decade. In comparison, equities in Japan and the U.K are expected to yield 7.6% and 6.9%, respectively.

While the U.S continues to be a hub for technology stocks, defensive stocks such as consumer staples, healthcare, and utilities that offer steady dividends are likely more common outside the U.S., according to J.P. Morgan’s report. This trend might play a role in shaping global investment strategies in the coming years as investors seek to optimize returns while managing risks.

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