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Investors may be turning to Europe as US markets (^DJI, ^IXIC, ^GSPC) begin to level off. Charles Sizemore, chief investment officer at Sizemore Capital Management, joins Market Domination Overtime to explain why it's smart to diversify into European markets and equity exposures, namely as European nations begin to ramp up defense spending.
To watch more expert insights and analysis on the latest market action, check out more Market Domination Overtime here.
I want to start, Charles, where you see opportunity right now. We have, we do have some smart folks, Charles, strategists, CIOs, they come on the show and and they do see opportunity overseas, specifically in Europe, and it sounds like Charles you agree with that call.
Oh, 100%. And it's not that I'm bearish on the US, and with the the tariff, the entire tariff trade war here, essentially on pause for the next 90 days, the biggest impediment to the US market going higher has been resolved. But the the bigger question, of course, is who is really in the wings waiting to buy the US market. Everybody is already in. Everyone is already overweight, whether you're talking about, you know, mom and pop investors, all the way to people running multi-billion dollar pension funds, the US has been their biggest holding, and then specifically US tech. So that has been a crowded trade for a while. After all of the volatility this year, if you're any investor, whether retail, institutional, whatever, you're you're looking at your portfolio from the top down, you're going to say, okay, well, I I don't really have much exposure to Europe right now. I don't have a lot of exposure to emerging markets. Suddenly, it makes sense to reallocate. So even if you know, that rising tide lifts all boats, markets in general are looking good, I think you are likely to continue to see capital floating into Europe and and really non-US stocks. It is worth noting the the euro, like a a broad basket of European stocks, you know, just take a Vanguard Europe ETF, for example, is up about 17% year to date, whereas the S&P 500 is flat. So I I definitely see a longer runway there.
Yeah, and one of the questions, I was talking to Maria Vietnam about this over in Europe. She sits in Europe about a little bit of the European trade potentially being overplayed, because to your point, we've already had a lot of gains year-to-date. So, are there any specific stocks or sectors that you are looking at that you think still have a little bit more room to run in the Europe trade?
Yeah, sure. But before I get into that, I would say I I think it's really untrue that that that trade's looking long in the tooth. If you look at the, you know, call it the the 2000 to 2007 window, European stocks beat the pants off the S&P 500, and that was, that was a long stretch. We're talking about seven years there. What we're talking about today is measured in months. But, you know, drilling down, what specific sectors look really good? Defense. What's happening there? Europe and the US have really diverged. You know, their interests are no longer aligned as they were for the Cold War and the decades immediately following. Europe figured out that they're kind of alone in the world right now. If they want to project power, want to project influence, they're going to have to do it themselves. That means they are rearming. Just this week, the various members of NATO were talking about increasing defense spending to up to 5% of GDP. That's a stretch. I don't know that they'll ever get that high, but you are still, regardless, looking at a major investment in defense, and European countries are going to be more likely to buy that at home. They're more likely to look to their domestic defense contractors as opposed to looking at ours.
