Mind the gap

As we approach the end of the first quarter, the rotation from US assets into European ones is clear. Take a look at the chart below: on the left side you can see the drawdowns from their respective 52 week highs for selective US popular assets. Half of them are in bear market territory. On the right, the European names that are flying YTD: banks, energy and defense companies are taking the baton for the year. This information will feed the investment comittees of many institutional investors that perhaps will rebalance their portfolios more heavily into the new investment paradigm, while the “U.S. detox period” passes, using the words of Secretary of Treasury Bessent. The catch? The combined European equity market cap is $10Tn, while the U.S. is $40Tn. How much money can flow into Europe until the valuation gap is closed?

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