While the Eurozone has been combating both increasing political divisions and stagnant economic growth since the financial crisis, the United States has been a relative pillar of stability. Investors have rewarded U.S. equities with higher multiples reflecting: 1) its mix of more innovative and rapidly growing companies, especially in healthcare and information technology, 2) a better capitalized banking system, and 3) more resilient economic growth.

As we head into a contentious U.S. election season in 2020, we see the valuation premium of U.S. equities dissipating given the risk to earnings that the leading candidates’ platforms present. We also believe the economic fundamentals in Europe may be close to a cyclical trough, which could lead to a period of meaningful outperformance.

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