US shares will likely be outperformed by Europe for the following 12 months, says the strategist
A view of Ibex 35 securities on the Madrid Stock Exchange on November 10, 2020 in Madrid, Spain.
Eduardo Parra / Europa Press via Getty Images
US growth and stock market profits will be overshadowed by most other global regions in 2021, according to Quilvest Wealth Management's investment committee member Bob Parker.
"We are actually at a very interesting time in the markets, and I think that non-US markets will outperform the US in the next six to nine months," said Parker on CNBC's "Squawk Box Europe" on Friday.
In a research report emailed to CNBC, Parker noted that investors will focus on markets and sectors that will recover rapidly from the coronavirus restrictions, "where the growth prospects are most persistent and where valuations are less are stretched ".
He believes a key theme for next year will be European stocks outperforming the US, with markets in the UK, Spain and Italy leading that strain. The Spanish IBEX 35 index is up almost 24% since early November, while the Italian FTSE MIB is up 21%.
"Positive expectations for vaccines have resulted in people returning to a very unloved, undersized market," Parker told CNBC. He also believes that growth in the euro zone and the UK will either outperform or match growth in the US over the next year, which underpins these stock market gains.
Parker stated that until that month, much of the movement in the stock markets this year was driven by US stocks, which outperformed most other markets, with the technology sector posting the most gains. However, throughout November, the "tech-heavy" markets underperformed, he added.
Since the beginning of the month, the tech-heavy Nasdaq has risen by almost 10% according to refinitive data. Meanwhile, the Dow Jones Industrial Average, which is biased towards stocks more reliant on cyclical economic recovery, is up around 13%.
In particular, announcements of effective Covid-19 vaccines from pharmaceutical giants Pfizer and Moderna have fueled the Dow's outperformance as a sign that economies may soon be able to fully reopen and recover from the crisis.
Parker also pointed out that the same trend played out with China's tech-heavy CSI 300 index, which underperformed other Asian markets last month. The CSI 300 is up nearly 6% since Nov. 1, while the Hang Seng Index in Hong Kong, which contains a larger sector mix, is up 10%.
"I think topic one was this very crowded technology trade in both China and the US that we saw their profit-taking," said Parker.