STILL MAKING EUROPE GREAT (AGAIN)

In their latest research, BNP Paribas strategists write that rotation of investments to Europe has more room to run even though it has already outperformed the U.S. on a year-to-date basis. For example the STOXX Europe 600 SXXP index is up more than 23% so far this year, while the S&P 500 index SPX is down more than 4%.

Of course BNP is not the only bank countering U.S. President Trump's Make America Great Again (MAGA) slogan with a Make Europe Great Again (MEGA) reference.

Around the time of Trump's inauguration in January, BofA Global Research in a report titled "Make Europe Great Again" said European stocks saw their second largest allocation in a quarter of a century in January, as lagging risk assets played catch up. The BofA survey of investors showed asset allocation remained risk-on, with investors bullish towards the U.S. dollar and stocks, but bearish toward everything else.

The BNP research, headlined by George Debbas, head of European equity derivatives strategy at the bank, cites better earnings, underweight allocations, cheaper valuations and "positive thematic momentum" for Europe's out-performance.

Of course they cite risks too, including tit-for-tat trade tariffs, European yields retracement and "a volatile political climate in the US that is increasing fears of recession," which could also impact European equities.

And according to the research "Europe tends to underperform on a standalone basis when the S&P suffers a sustained correction." But, still, the strategists see a chance that Europe's out-performance continues.

In Europe's favor it points to items such as fiscal spending versus U.S. budget cuts as well as improving European consumer confidence improving versus deteriorating U.S. confidence.

And they note that "ongoing inflows suggest continued rotation" into European equities.

With this in mind they see the best opportunities from "harvesting volatility normalization, finding hedges through correlation, buying quality names, focusing on statistically appealing trades, and remaining Long on relevant thematics."

Here a year's snapshot of STOXX vs SPX: