US economy, stocks face a difficult year

The Herald

Last year took the US economy and markets on a bumpy ride — and the year ahead also looks tough. It’s led some strategists to argue 2023 could be Europe’s time to shine.

Zeynep Ozturk-Unlu, Deutsche Bank’s chief investment officer for EMEA, sees a case for Europe outperforming both economically and in capital markets, with contraction and recession fears becoming “more accelerated” in the US than in Europe.

This is despite Europe facing its own challenges, Ozturk-Unlu said, including the ongoing war in Ukraine, the energy crisis and inflation that has not yet peaked — and is unlikely to hit the European central bank’s 2 percent target until mid-2024 at the earliest.

“Europe has been in expansionary fiscal policy mode for quite a while, especially due to the energy crisis,” she told CNBC’s “Squawk Box Europe” Monday. “But beyond that … Europe is also betting on the reopening of China and it is going to give positive tailwinds to the European growth story.”

European GDP growth last outpaced the US in 2017, though final 2022 figures have not yet been released. Ozturk-Unlu pointed to the diversification of sectors in Europe compared to the US and sustainable production growth, particularly in Germany and France, as a case for the region having more stable economic growth.

When it comes to stocks, she continued: “It doesn’t mean Europe is completely immune and is in great shape, but in relative terms the shift from growth [stocks] to value actually gives a little bit more opportunity to Europe compared to US.”

So-called growth stocks — which include the big US tech stocks — were hit hard in 2022, as the US Federal Reserve raised interest rates which hit future earnings expectations. Value stocks, in comparison, tend to outperform as rates ride. — CNBC.