Skip to main content
Skip to content


U.S. Equities Are Back in Favor

Earnings outlook for U.S. companies is trending positive.

Key Insights

  • Tailwinds that have boosted equities outside the U.S.—including low energy prices in Europe and the post-COVID reopening in China—are expected to fade.
  • Given the improved earnings outlook for U.S. companies, our Asset Allocation Committee recently increased the allocation to U.S. stocks from underweight to neutral.

From late 2022 into 2023, non‑U.S. equities—especially in Europe and China—significantly outpaced U.S. stocks. However, the tailwinds that drove outperformance in those regions may be peaking. Meanwhile, U.S. company earnings have rebounded after an extended period of deterioration. The gap in their performance relative to other global equities has narrowed by more than half (Figure 1).

U.S. Equities Bounce Back

(Fig. 1) U.S. equities vs. the rest of the world


November 1, 2022, through June 22, 2023.

Past performance is not a reliable indicator of future performance.

Sources: T. Rowe Price analysis using data from FactSet Research Systems Inc. All rights reserved. MSCI Indexes. See Additional Disclosures.

U.S. Growth Stocks Earnings Estimates Have Inflected Higher

(Fig. 2) Earnings outlook for U.S. growth stocks


Actual outcomes may differ materially from estimates. Estimates are subject to change.

Sources: T. Rowe Price analysis using data from FactSet Research Systems Inc. All rights reserved. FTSE/Russell Indexes. See Additional Disclosures.

European stocks rallied in early 2023, supported by sharply lower energy prices amid an unseasonably warm winter. But this price relief is likely to reverse as energy demand increases during the summer months. Colder temperatures in the coming 2023–2024 winter season also could boost energy consumption.

In China, robust economic activity driven by the post-COVID reopening appears to have faded, and stimulus measures to shore up economic weakness are unlikely to match prior levels given the government’s focus on financial deleveraging and ensuring that the benefits of economic growth are shared more widely.

Meanwhile, despite looming headwinds, the U.S. economy has remained resilient, and the U.S. earnings outlook is trending positive (Figure 2). U.S. growth stocks, technology stocks in particular, have been boosted by recent developments in artificial intelligence. Companies in the U.S. industrials sector also have benefited from higher demand spurred by the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act, the Inflation Reduction Act, and corporate reshoring.

Notably, valuations for U.S. stocks far exceed other global stocks. However, this valuation gap can be justified by differences in company profitability. U.S. stocks are more expensive because they have enjoyed a sizable advantage in profitability—a gap that has been expanding gradually for nearly 15 years.

Given this improved outlook for U.S. stocks, our Asset Allocation Committee moved its allocation to U.S. stocks from underweight to neutral relative to the rest of the world.



Additional Disclosures

MSCI and its affiliates and third party sources and providers (collectively, “MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein.  The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products.  This report is not approved, reviewed, or produced by MSCI.  Historical MSCI data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction.  None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2023. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.


This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources’ accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date written and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request. It is not intended for distribution to retail investors in any jurisdiction.

Previous Article


Central Banks Step Into Potential Policy Error Territory
Next Article


Where Now for Global Equity Markets?