BCA Research strategists are advising investors to rotate capital out of US equities and into European stocks, arguing that the balance of power in global markets is shifting as AI hype cools and energy prices look set to retreat.
Chief strategist Jeremie Peloso says the market is finding it increasingly hard to ignore the enormous AI infrastructure costs that big tech is incurring without yet turning profitable. A recent 6.4% tumble in the Nasdaq exposed the fragility of the tech rally, he adds, and fears of heavy regulation and open‑ended capital spending are forcing a reassessment of US asset allocations.
Against that backdrop, Europe stands to gain. The region has been hit hard by high energy costs, but BCA forecasts that oil and gas prices will normalize in the first half of 2027. That view holds even after allowing for a roughly 30% risk of escalation around Iran. Cheaper fuel would bolster European consumers’ purchasing power and lift corporate profits.
Lower energy costs would also free the European Central Bank from some constraints. Markets are currently pricing in a 50‑basis‑point interest rate hike by the ECB in 2027, but that outlook could be revised if the energy shock eases. The Fed, by contrast, risks being stuck with more persistent domestic inflation.
BCA recommends buying defensive European sectors, which trade at a significant discount to US peers. At the same time, the firm is careful to stress this is not a bullish call on a European miracle. The baseline macro outlook for the region remains weak. On a global basis, the analysts still favor government bonds for capital preservation. However, BCA argues that an overvalued US AI bubble looks far riskier than stagnant Europe when choosing between equity markets today.
