In This Article:
European stocks (^STOXX50E, ^GDAXI, ^FTSE, ^FCHI) are emerging as a top trading theme in 2025. StoneX chief market strategist Kathryn Rooney Vera sits down with Madison Mills and Bullseye American Ingenuity Fund portfolio manager Adam Johnson to speak more on investment opportunities outside of the US and which sectors are best equipped to withstand an economic slowdown.
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After years of underperforming, Europe has emerged as a top trade for 2025. Meantime economic data from China pointing to some resilience. So where can investors find alpha? Joining me now, we got Katherine Rooney Vera, Chief Market strategist at StoneX. Katherine, great to have you. So talk to me about this trade. We've obviously seen the narrative of US exceptionalism stalling out here. Where do you find the most value abroad?
Well, we've seen Europe outperform in a significant way and I think that has to do with, um, the worst possible scenario being priced into um, to the valuations. And that's effectively what has occurred year to date. The Europe has outperformed the US in large cap and I I I like Adam Johnson. I think, I think, nice to see you again. Um, I think there are opportunities in the US, especially as we see this panic set in. Um, but there's a price for everything. And our call on Europe is less a structural call. We're not saying that Europe is, has become, you know, much more flexible in terms of its labor market, or is the or is facing a robust econo economic recovery. We're saying that at some point the bad news, um, it can't take the prices too much lower. And that's what we're seeing. We're seeing some rebound in European equities. Um, but I do think that the US will still have a good year. Um, my suspicion however, Madison, is that we are seeing, um, that short-term pain for long-term gain scenario play out. So there probably will be additional opportunities, as Adam said, to accumulate positions in, uh, strong sectors and strong names as the market, uh, potentially goes lower.
And I know that your view is that we are heading into a slowdown, not necessarily a recession. We've talked about Europe, we've talked about the US, which sector, even specific stocks are best positioned amid a slowdown to benefit from a slowdown?
Well, thanks for asking that because I'm very proud of my answer. My first, my top pick coming into this year was healthcare. It's the top performing asset class. My top pick for last year was utilities. It was about the third best performer last year. Um, I think healthcare is going to, um, is going to do well this year. You have to be defensive, I think, in in such a volatile time for the markets with elevated uncertainty. We're not expecting recession. We don't think we're lodged in a recession at the moment. But we are seeing a shock of uncertainty, which precludes consumers from consuming, or it at least pauses their consumption. Same thing on the private sector front, investment has been paused, perhaps not halted altogether, but paused. And I think that has to do with the shock from tariffs. Now, tariffs don't have an immediate and persistent effect on inflation. We saw that from Donald President Trump 1.0 and the ensuing, uh, impact on inflation from his first round of tariffs. Um, but they do, and historically have proven to be the case, have a very negative effect on the markets. So we should anticipate some volatility. And that's why I've been recommending the purchase of protection with protective put options. And now what we see today, Madison, is that, um, we have record volumes of puts. So those puts are attractive when the VIX is low. They become much more expensive when everybody wants them.