A report from J.P. Morgan suggests that European equities are likely to offer higher returns than U.S. equities over the next 10 to 15 years. John Bilton, head of Global Multi-Asset Strategy at J.P. Morgan Asset Management, attributes this trend to the overvalued dollar, as well as cheaper valuations and higher dividends in other regions.
While U.S. stocks have been performing well, outperforming the rest of the world by 277% over a span of 14 years, the situation is expected to change. Last year, the U.S. market experienced a decline due to faster inflation and rising interest rates.
Bilton recommends not selling U.S. equities entirely, but rather considering adding to a core portfolio by diversifying overseas. Dollar-based investors have the potential to benefit from increased returns by investing in international markets.
In the past year, the Euro STOXX 50 has gained 14%, compared to 10% for the S&P 500 and 4.4% for the Dow Jones Industrial Average.
According to J.P. Morgan’s Long-Term Capital Markets Assumptions report, the euro area is expected to deliver an average annual return of 8% for equities over the next 10-15 years. Japan follows at 7.6%, and the UK at 6.9%. In comparison, the U.S. is projected to return an average of 5.3%.
Different regions may excel in different types of stocks. For instance, the U.S. remains the hub for technology stocks, while defensive stocks such as consumer staples, healthcare, and utilities that provide stable dividends regardless of economic conditions are more likely to be found outside the U.S.
