European stocks will outperform their U.S. and emerging market counterparts in the coming year primarily due to a weak euro that is showing no signs of getting stronger, said Jose Rasco, chief investment strategist at HSBC Private Bank Americas (HSBC). ‘We see continued double-digit growth in European earnings even though economic growth is somewhat modest,’ said Rasco. Rasco said he also sees decent upside potential for emerging market equities in 2016 because of the recent improvement in economic activity. He ranked the U.S. stocks third in terms of returns, saying he expects a mid-single digit type of return next year. ‘In the U.S. we see stable growth of 2.25% to 2.5%, no inflation problem per se, certainly not a wage/price spiral and a modest acceleration in inflation,’ said Rasco. Rasco added the American consumer is fairly strong with the employment picture bright and energy prices low. He is not worried about the Federal Reserve embarking on a tightening cycle either. That said, he said he is keeping a close eye on the dollar which could seriously threaten profits at U.S. multi-nationals should it grow too strong.
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