Costly U.S. Stocks Outshine Europe for This $10 Billion Investor

(Bloomberg) -- There are solid reasons for U.S. equities to be pricier than their European peers, according to Prague-based CSOB Asset Management AS.

The Czech investment arm of KBC Groep NV sees the premium as justified because of U.S. stocks’ superior profitability and stronger resilience to trade-war risks, said Ales Prandstetter, its chief strategist. CSOB oversees the equivalent of $10.25 billion, about a third of which is in equities.

“U.S. stocks still fundamentally make sense to us, despite the high valuations,” he said in an interview days after the S&P 500 Index’s latest all-time high. “Europe is comparatively cheap, but we don’t see a trigger for a major repricing. It might come when the European Central Bank starts raising rates, and this finally lifts margins for the financial industry.”

Costly U.S. Stocks Outshine Europe for This $10 Billion Investor

Prandstetter also says:

  • CSOB is slightly overweight North America, neutral Japan, neutral to underweight Europe, underweight Asia Pacific
    • Most negative on U.K. because of Brexit risks, and emerging markets because Fed rate hikes are increasing debt burden for companies, individuals, and governments; expects more “significant turbulence” in Turkey, which could sour sentiment toward other EMs
  • Overweight consumer discretionary, financials, and information technology; underweight consumer staples and utilities

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