Investors are returning to US stocks, betting that the domestic stock market can weather new economic headwinds better than other parts of the world.
By contrast, the United States Less dependent on Russian oilWhile a number of COVID-19 patients have been admitted to hospitals has decreased significantly. Many investors believe that the US economy has entered the geopolitical turmoil in recent weeks strong enough to withstand the jump in oil prices and the growing anxiety sparked by Russia’s invasion of Ukraine.
The S&P 500 rose 6.2% last weekBest performance since November 2020, after the Fed raise interest rates For the first time since 2018. The index is now up 5.6% since Russia’s invasion of Ukraine and has trimmed its losses for the year to 6.4%.
The recent rally prolongs years of outperformance in the United States. Since the beginning of 2010, the S&P 500 has quadrupledAnd the The MSCI index, which tracks stocks outside the US, is up about 30% during that time.
Recently, the German DAX has fallen 1.5% since then Russian invasion on February 24. The Shanghai Composite Index is down 6.8% and Hong Kong’s Hang Seng Index is down 9.5% over the same period.
“The United States is a safe haven in an increasingly risky world,” said Jim MacDonald, chief investment analyst at Northern Trust, which managed $1.6 trillion at the end of 2021.
This week, investors will look to Federal Reserve Chairman Jerome Powell’s speech on Monday for more clues about the economic outlook. They will also analyze earnings reports from
To measure the power of the American consumer.
““The United States is a safe haven in an increasingly dangerous world.”“
US production of energy and agricultural products Help insulate it from recent increases in commodity prices while Strong US job market It should support the local economy, Mr. MacDonald said. He said Northern Trust had been buying US stocks over the past month and selling shares from other parts of the world.
The Chicago-based company is not alone. Money managers in recent weeks have shifted their appetite for regional stocks, loading them up on US stocks and falling European stocks. The net percentage of respondents to Bank of America Global Research’s global fund manager survey who said they experienced an overweight of US stocks jumped by 27 percentage points in the February-March period, sending the country’s shares back to a net hyperbolic position in the survey .
Abroad, it was a different story: The proportion of survey respondents who were overweight in Eurozone stocks fell by 48 percentage points to the largest underweight reading for that region since July 2012. Stock preferences in emerging markets, Japan and the United Kingdom also declined.
The conflict in Ukraine Expected to put pressure on European economies It strains supply chains and raises the cost of energy and goods for households and manufacturers. Europe’s economic recovery was less robust than that of the United States even before Russia’s invasion of Ukraine.
Chief Investment Officer Stephanie Lange said Atlanta-based wealth management firm Homerich Berg is considering reducing its allocation to international equities and moving to short-term bonds due to the risks of an economic slowdown outside the United States.
“We don’t see the risks of a recession in the US,” she said. We are beginning to see increasing recession risks globally. There is a bifurcation.
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To be sure, some investors are saying that even with geopolitical instability rising, stocks are trading offshore at a steep enough discount to US stocks that it’s worth considering. The S&P 500 index last week traded at 19.2 times its expected earnings over the next 12 months, according to FactSet. The German DAX index had a forward multiple of 12.7, while the Hang Seng index traded with an expected profit of 10.1 times.
“I think most of the risk is actually priced in in international markets at this point,” said Ben Kirby, co-head of investments at Thornburg Investment Management.
Thornburg has added in recent weeks to its positions at the Dutch insurance company
The French oil and gas company
TotalEnergies SEAnd the
US equity funds saw their biggest outflows in five weeks in the week ending Wednesday, while emerging stock markets saw their first outflows since December and European stocks posted their fifth straight week of outflows, according to a BofA Global Research analysis of EPFR Global data.
The United States makes up about 60% of the MSCI ACWI All Cap Index, a measure of the global stock market.
Trading has been choppy in the US as well as abroad. The S&P 500 and Dow Jones Industrial have both suffered their first corrections – at least a 10% drop from a recent high – in two years in recent weeks. Nasdaq Composite I entered a bear marketdown 20% or more.
However, it appears that many investors are using these pullbacks as buying opportunities. BofA Securities reported that clients have bought lower stocks and have recently preferred stocks in the consumer goods and discretionary sectors.
The top-performing sectors in the S&P 500 over the past month are energy stocks, which benefit from higher oil prices, and utilities and healthcare stocks, which investors often turn to when they are. Cautious about the economy prospects.
Pharmaceutical companies’ shares rose 21% over the past month
Increased 20% and utility shares
gained 11%. Another strong performer is a supermarket
which advanced by 22% and led the charge
which rose by 14%.
Write to Karen Langley at [email protected]
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