While Rossi said developed market stocks could outperform emerging markets, he remains cautions on European equities, which are “stuck in the middle.” However, European equities could gain support from a falling euro currency, lower oil prices and improved valuations.
The Vanguard FTSE Europe ETF (NYSEArca: VGK), the largest U.S.-listed Europe ETF, has declined 11.3% over the past month.
“The sustainability of the US economy is clear, but what is good news for the US presents a hurdle for other markets, particularly for emerging markets and to some extent also Europe,” Rossi said, reports Anna Fedorova for Investment Week.
The emerging markets will be hampered by slow Chinese growth and a strengthening U.S. dollar. Additionally, as emerging countries implement economic reforms, financial markets could lose patience with the developing economies’ slowing pace.
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Max Chen contributed to this article. Tom Lydon’s clients own shares of SPY and QQQ.