Here’s why U.S. struggles with the coronavirus could lead to Europe’s stock market taking the lead
A growing number of prominent Wall Street institutions are making the prediction that 2020 will be the year for Europe’s stock market to outshine its U.S. counterpart as the coronavirus takes diverging tracks in the two economic powerhouses.
Even as the U.S. struggles to curb the deadly COVID-19 disease, the virus hasn’t seen a resurgence in the eurozone, influencing how money managers see their respective paths of recovery. Barclays, BlackRock and other banks are now advising investors to lift their holdings of European equities, sometimes at the expense of their U.S. assets.
This view has gained ground with the popularity of high-frequency data to track efforts to reopen the global economy. Analysts say they show how a rapidly rising case count is keeping Americans indoors, a factor that could delay the U.S.’s return to normal, while a diminishing tally in Europe encourages their citizens to go out and open their wallets.
“Mobility [in Europe] has rebounded quickly and is now on par with the level in the U.S. This bodes well for a pickup in activity, especially as it comes with a lower risk of infection resurgence, in our view. As a result, we could see the pace of recovery in the second half outpacing other regions, including the U.S.,” said analysts at the BlackRock Investment Institute in a note last week.
Before the coronavirus pandemic, European markets were lagging their U.S. peers as the eurozone made a sluggish recovery from its devastating debt crisis, even after the European Central Bank bought hundreds of billions of government bonds and slashed its benchmark interest rate into subzero territory.