EV Forward: Equity Markets

Timely insights from portfolio managers and industry experts on key financial, economic and political issues.

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance strategy. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness.

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      By Edward J. Perkin, CFAChief Equity Investment Officer, Eaton Vance Management

      Boston - Investors have recently flocked to sectors perceived to be safe, such as utilities, real estate investment trusts (REITs) and consumer staples, but even defensive stocks can become risky at high enough prices.

      Fed rate cuts combined with an improving outlook for the economy could be catalysts to steepen the yield curve, benefiting out-of-favor value stocks — especially banks.

      Despite the relative strength of the U.S. economy, we believe that investors should look outside the U.S. for good values in the stock market.

      Europe and Japan offer cheaper prices and the potential for more upside from improving sentiment around trade tensions and global economic growth than the U.S. market.

      Valuation disparities between steady growth and cyclical value are at historically wide levels, with Europe the potential beneficiary of any rotation away from growth back to value.

      In Japan, we see improving corporate governance, higher returns on invested capital and lower financial leverage.