Citi strategist Tobias Levkovitch says the European slowdown will begin to hammer US companies with European exposure. He does not believe US investors have realised this yet. He also thinks US and European weakness could spread to emerging markets…which doesn’t leave a heck of a lot of the world left.
Int’l strength has bolstered U.S. profits, but this seems likely to change – With Europe accounting for nearly half of American public companies’ foreign sales, a European slowdown could meaningfully affect future profits and stock prices, especially given such trends do not seem to be built into expectations yet. Softer US and European demand may be felt in developing economies as well.
Industries and sectors with the most European exposure:
- Cyclical industries such as Tech Hardware, Software and Autos & Components, as well as Energy, Materials, and Capital Goods
- Defensive groups including large cap Pharma & Biotech and Household & Personal Products.
- Leisure, Video Games, Staffing, Diversified Financials and Footwear
Gee, Toby, so what’s left?