European equities outperformed U.S. in Q3

Stocks in developed European markets outperformed U.S. equities by nearly 7.5% in Q3, according to Russell Indexes.

They also beat other developed-market equities by about 2%.

Read: More evidence of European recovery

The current valuation for the Russell Developed Europe Index as of September 30 is lower than the Russell Developed ex-US Index and the Russell 3000 Index.

For 2013 year-to-date as of September 30, U.S. stocks as reflected by the Russell 3000 Index still lead with an 18.1% return relative to a 14.9% return for the Russell Developed Europe Index for the same time period. For the last 12 months as of September 30, developed European stocks have also outperformed U.S. stocks.

For Q3, Russell Developed Europe Index country constituents Spain (+20.7%), Finland (+18.7%) and Italy (+15.2) led within the Index.

Read: Strengthen exports to developing economies, says BoC

The Russell Developed Europe Index is also fairly valued relative to the Russell Developed ex-US Index and the Russell 3000 Index. It has a 17.5 one-year forward estimated weighted average price to earnings ratio (P/E) as of September 30, relative to an 18.0 and 25.7 P/E for the Russell Developed ex-US Index and Russell 3000 Index, respectively. The Russell 3000 Index P/E reflects a marked increase from its 18.5 P/E on December 31, 2012.

“Several factors have contributed to the strong recent performance of European equities relative to equities in the U.S. and non-U.S. developed markets,” said Wouter Sturkenboom, investment strategist with Russell Investments Europe.

“We continue to see improving economic fundamentals in Europe combined with relatively low market valuations. In addition, capital flows into European equities are strong, the Draghi-led ECB remains dovish and discussion around the fiscal austerity agenda is lessening. These conditions have combined to help create a favorable climate for European equities.”

Read: Eurozone inflation down

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.