‘No doubt’ U.S. economy is slowing, Invesco says, tipping Europe to outperform
The U.S. economy is clearly losing momentum — but that does not necessarily spell an imminent recession, according to Ben Gutteridge, market insights strategist at Invesco. “I’ve no doubt the U.S. economy is slowing,” Gutteridge told CNBC’s “Squawk Box Europe” on Monday. With job creation beginning to cool, he acknowledged that some investors see the current backdrop as the phase that often precedes a downturn. However, outlining Invesco’s broadly positive stance on U.S. equities, Gutteridge said he is “at ease” with the current market trajectory, arguing that the slowdown is more nuanced than the recession narrative suggests. “We would suggest we’re in a low-hiring, low-firing environment which, coupled with monetary easing that should be forthcoming, [shows] that probably this is a mid-cycle slowdown,” he said. Against that backdrop, he added that “equities moving higher into year-end is not unreasonable.” .STOXX YTD mountain Stoxx Europe 600. Looking ahead to 2026, Gutteridge said Invesco expects European equities to be well-positioned to outperform, particularly as the U.S. cycle cools. “In part that would be because we think the dollar may weaken further from here — it’s moved basically sideways over the last six months, but we think it could weaken further,” he said. Invesco is “excited” about opportunities in Europe, the strategist added. He pointed to a combination of European Central Bank rate cuts and an increase in lending by the continent’s banks, coupled with forthcoming infrastructure and defense stimulus programs, more attractive valuations, and the prospect of a softer dollar. Taken together, this “adds up to continued European outperformance,” he said, calling it “an underappreciated story.” Still, Gutteridge flagged risks on the U.S. side. He acknowledged that potential reductions in tariffs, taxes and interest rates could offer a growth tailwind next year — but may also bring unintended consequences. “There’s something that’s very stimulative and growth positive about that. There’s also something a little inflationary maybe,” he said, warning that debt sustainability concerns could “get the bond markets a little bit upset.” He welcomed signs that U.S. politicians are paying more attention to the deficit, describing it as helpful for both bond and equity markets. “We want to be mindful that too much stimulus could get the central banks moving the other way and get the bond markets moving the other way,” he added. Gutteridge also reflected on continued tariff tensions, noting how Europe’s auto sector remains “under material pressure,” with carmakers having been “disastrously slow” to seize opportunities in electric vehicles as China has displaced incumbent combustion engine vehicles. While he expects a policy response from the European Union, he was skeptical that the bloc would ultimately adopt a more hardline protectionist stance on trade policy. “I don’t see it in the European make-up necessarily to be so vicious,” he said, stressing the region’s desire for a “working relationship… a very fertile working relationship with China.”
