European equities lag US equities more than ever

Current market commentary

In the end, the market got it right: Trump won the US elections, and by a landslide at that. Among the winners were Bitcoin, US equities and the US dollar. By contrast, US bonds suffered from rising inflation and sovereign debt fears. Gold was unable to benefit and instead fell sharply, due to rising real yields, the strong US dollar and a rotation out of gold and into Bitcoin. European and emerging market equities had a difficult time, weighed down by the prospect of higher tariffs. In particular, the US equity markets are now pricing in an almost perfect economic scenario, with valuation levels at the index level now at a similar level to those seen during the technology bubble around the turn of the millennium. However, equities should remain supported by share buyback programmes and seasonality into the new year. Especially since there is plenty of dry powder parked on the sidelines. Next year, however, should see a return to volatility.

Short-term outlook

After two politically eventful weeks, things will calm down a bit over the next two weeks. In addition, the Q3 reporting season is drawing to a close. In the coming weeks, only around 5% of S&P 500 companies will report. At the beginning of the week, the focus is on the G20 summit of heads of state and government and a speech by Chicago Fed Chairman Goolsbee, while in the US, Thanksgiving Day is celebrated next Thursday. This week's data releases will focus on the consumer prices (Oct.) and retail sales (Oct.) from the UK, as well as the preliminary purchasing managers' indices (Nov.) for the manufacturing and services sectors in Germany, the US, the eurozone and the UK. Next week, the ifo Business Climate (Nov.) and Retail Sales (Oct.) for Germany, the preliminary US GDP annualised (Q3) and the Consumer Price Index (Nov.) for the Eurozone and Germany will be reported.