Daniel Morris of BNP Paribas joined Yahoo Finance Live to talk his market outlook and why he's paying attention to European markets.
JULIE HYMAN: Let's bring back in Daniel Morris, who is BNP Paribas Chief Market Strategist. And Daniel, being in Europe as you are, you look at stocks not stocks the US, of course, you look at stocks around the globe. And you think maybe European stocks might be a little bit more attractive right now. Make your case for us.
DANIEL MORRIS: Well, I would qualify that only in terms of the horizon. So I think what we've seen most recently, the a big bounce that you had in Europe was reflecting the surprising news on the vaccine at a time when Europe was kind of at the lowest point, relatively, in terms of dealing with the pandemic, increased restrictions, and so consequently with this news, it's going to bump them the most.
We're actually a bit more cautious on the outlook for Europe over the medium term. So if we had known that the virus news was-- excuse me-- the vaccine news was going to come out when it did, it would have had an overweight. But over the medium term, actually our overweights are to the US and emerging markets.
And the reason for the caution in the medium term for Europe is if you think about the reaction exactly to the restrictions, to the kind of soft lockdown they've sort of put into place, a lot of it has been measures to support the labor market, which is all well and good. It's helped consumer demand hold up reasonably well.
So you've had relatively long furlough program. Several countries have prevented companies from laying off workers full stop into next year. So that's protected those incomes. But the concern then is that the economy is not adapting in the way that you would imagine is happening in the US.
You had an unemployment rate shoot up so much in America and now come down, think of all these people that have moved to other parts of the economy in other sectors that have some growth potential, whereas if you keep people in the same jobs, that's not going to happen. So it's that medium term outlook where we're a bit more cautious and consequently actually don't have an overweight to Europe over the medium term.
BRIAN SOZZI: Daniel, should investors invest today on the assumption that we get mass global immunization in the first half of next year? This has never been done before.
DANIEL MORRIS: I don't know if I would make that the primary premise for an investment today. I think we would kind of look at all the factors that should give us a sense of what the outlook is for risk assets more broadly. So again, we do have the prospect of a vaccine in the reasonable near term. It is going to be next year. I think we're reasonably confident of that.
Now, it's not going to be a perfect rollout. We'll have questions about efficacy, availability, and so on. But nonetheless, we're moving in the right direction. You add to that what has been a reasonably resilient US economy, given everything that's gone on. For the most part, the economic data has surprised to the upside. Think it's the third quarter earnings season, very high earnings surprises, earnings beats about 20% of that income.
You had 2/3 of companies raising guidance for the outlooks, all that supportive. And then of course, we can't forget the central banks. And that's something to keep in mind when we worry about stimulus, because to whatever degree, we're disappointed in the amount of stimulus that comes out of the government.
To some degree, the Fed can compensate for that, so how much they pursue quantitative easing or other programs that they look to support the economy is in a sense going to balance the amount of stimulus that we get out of Congress. So net, between monetary and fiscal, you're still in an extremely supportive environment for us for risk assets.
JULIE HYMAN: Daniel Morris, always good to see you, BNP Paribas Chief Market Strategist.
DANIEL MORRIS: Thank you.
JULIE HYMAN: Thanks so much, appreciate it.