This episode explores the relative merits of investing in U.S. versus European equities, particularly in light of Europe's recent market outperformance. Against the backdrop of Europe's strong performance driven by sectors like defense and banking, the discussion pivots to a potential tactical opportunity in U.S. equities. More significantly, the panelists analyze the underlying factors contributing to this divergence, including policy sequencing, capital flows, and the impact of the U.S. dollar's strength. For instance, the deceleration in AI CapEx and the reversal of fiscal impulse are cited as contributing to the relative underperformance of U.S. equities. In contrast, the weakening dollar and improved earnings revision breadth in Europe are highlighted as potential drivers of future performance. Looking ahead, the panelists discuss the long-term structural dynamics, considering factors like tax rates, regulation, and the potential for diversification away from U.S. markets. Ultimately, the discussion suggests a potential for a relative shift back towards U.S. equities in the short term, while acknowledging the longer-term structural changes that could favor European markets.
