Post Italy “crisis,” are European stocks attractive? With last week’s news that Italy has formed a government, securing the country’s place in the Eurozone at least in the short term, this week we assess whether European stocks now represent an attractive opportunity. Relative to other opportunities, we don’t think so, as we will explain further. Political risk in Italy has dominated headlines recently, but European economic data has also disappointed throughout the year, as earnings have softened, and European stocks have meaningfully underperformed their U.S. counterparts over the past several years [Figure 1].

The May employment report confirmed that the job market remains healthy, with job creation showing signs of stabilizing after steadily slowing over the last several years. A healthy labor market should continue to provide support for the economy and consumer spending, and we may even see some acceleration as fiscal stimulus provides incentives that may draw more people into the labor force and encourage businesses to hire.

We are encouraged by stabilizing job growth; few economic indicators so strongly represent quality-of-life improvement for the people behind the numbers. However, labor activity tends to send late signals for m

Small caps are having a strong year, with the Russell 2000 Index up nearly 6% year to date, versus about 2% for the S&P 500 Index. We came into this year expecting small cap outperformance, and after a slow start in early 2018 they have delivered in recent months. Many factors have aligned to drive continued potential leadership from this group. Here we highlight three keys to our small cap outlook.

Three Keys to Small Cap Outlook

1. Technicals

Small caps continue to look very strong from a technical point of view. The Russell 2000 Index bottomed for the calendar year on February 8, 2018, and it has gained more than 11%

The Federal Reserve (Fed) reassured markets that its rake hike pace would remain gradual with the release of its May 1–2 policy meeting minutes last Wednesday. While the minutes revealed a generally upbeat assessment of the economy consistent with Fed views since the start of the year, markets read the overall tone of the minutes as modestly dovish, helped by some context on the Fed’s additional emphasis that its 2% inflation target is “symmetrical.” The language has been widely used in the minutes and statement for some time, but garnered closer scrutiny after the policy statement added the phrase again in a key passa