Jittery China and sputtering Europe boost bull case for US stocks

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In contrast, higher interest rates threaten to tip Europe into 1970s-style stagflation, as the economy sinks into a downturn and inflation runs above 5 per cent. In China, it remains unclear whether drip-feed stimulus can revive an economy in deflation. That’s accelerated an investor exodus from both regions. Investors have fled European equity funds for 25 weeks straight, Bank of America says, citing EPFR Global data, while Germany’s DAX, home to the region’s manufacturing stalwarts, has just posted its worst monthly performance since December. Europe does have an edge on share valuations – on a price-to-earnings measure, the Stoxx 600...