Harrison: Europe Will Outperform US

Your Real Vision Daily Briefing for April 27, 2020

Ash Bennington and Ed Harrison discuss the shape & speed of the coming recovery as well as the different economic trajectories of the U.S. and Europe.

  • The US and Europe will likely have different economic trajectories coming out of the coronavirus crisis and Ed Harrison is more optimistic about Europe’s prospects for recovery.
  • While he is also feeling bullish about the US in the long-term, Harrison said Europe’s response to the virus, social safety net, and universal healthcare position it for a stronger and faster recovery.
  • He said US equities may see some price discovery this week as tech companies release their earnings.

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As European countries that moved into lockdown are slowly opening up, Ed Harrison thinks that sentiment is positive around the potential for economic rebirth and said he believes that Europe may fare better than the US during today’s Real Vision Daily Briefing.

Overall Europe looks like it is going to emerge from this earlier and as a result, there may be more upside there in terms of the economy and earnings, he said.

Harrison cited Europe’s response to the virus, social safety net, and universal healthcare as reasons why it may experience a stronger and faster recovery than we will see in the US, but said that Georgia will be an interesting test case to gauge the potential US trajectory.

He said that American workers’ healthcare being tied to their employment could ultimately have a negative affect on consumer confidence and sentiment. As people lose their jobs in record numbers, they’re losing health coverage, too – a problem that Europeans do not have.

“We’ll see how well our system works, he said. “Stocks are priced for optimism, we will leave shutdown later [than European countries], and there may be less uptick when that happens.”

Harrison said he expects that the S&P won’t outperform but be more of a laggard and he is anticipating that we will get price discovery this week as tech companies whose stocks have been outperformers release their earnings and we get a sense of Q2 projections. 

“Tech is giving us the leadership in this rally,” he said. “If they don’t stand up, we will have some selling; if they do stand up, markets will hold up pretty well. It will be an exciting week.”