A parting of ways for the US and Europe?

An uptick in Eurozone economic data as well as relative political stability are among the factors most likely to drive a wedge between the performance of the US and European economic blocs in coming months. Recent PMI readings in Europe were far better than expected, with some modest semblance of inflation coming back into the system. The ECB acknowledged as much when at the end of June its President Mario Draghi said the European economy is on the cusp of transitioning from deflation toward reflation.

Meanwhile, other lead indicators in Europe, including GDP growth and earnings revisions, continue to improve driven by cyclical sectors. Despite the recent pullback in oil and commodity prices, cyclical sectors like consumer discretionary and materials have seen strong year-over-year earnings trends as underlying commodity prices remain higher than 12-18 months ago.

Mark Bogar – The Boston Company, a BNY Mellon company

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