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Investing.com -- Deutsche Bank is advising investors to remain underweight U.S. equities while maintaining a neutral stance on the so-called "Magnificent 7" technology giants, despite a recent pickup in U.S. market performance.

“The emergence of DeepSeek at a time of lofty valuations confirmed our preference for European over U.S. equities,” Deutsche Bank said, referencing its January outlook.

While the U.S. market began to outperform European equities only in recent days, the Magnificent 7 have risen 6% since Deutsche’s March call but still lag European equities by 15% year-to-date.

The bank reiterated that it continues to expect U.S. equity underperformance to persist “until a substantial cut in tariffs would bring relief.”

Although the S&P 500’s recent strength may continue in the near term, Deutsche Bank said, “we would stretch the ‘short-term.’”

According to the note, the broader macroeconomic and policy environment continues to favor Europe over the U.S.

“Although lower than feared for now, in our view, tariffs will still be a bigger burden for U.S. companies than for European companies,” analysts wrote.

Additionally, they said, “Political uncertainty is still higher in the U.S. than in Europe. Earnings momentum is still more favourable in Europe. Valuations are still more favourable for Europe. Fiscal policy is still more favourable in Europe. The rates environment is still more favourable in Europe.”

The note also pointed to geopolitical developments, noting that “a potential ceasefire between Ukraine and Russia would still be more favourable for Europe.”

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