Demand for higher returns will grow as bond yields collapse ReutersMario Draghi comes bearing gifts for U.S. stocks.Europe’s €60-billion-a-month, bond-buying program is designed to reignite eurozone’s ailing economy, but if history is any guide, the biggest beneficiaries will be risky assets such as stocks. Since the announcement of the quantitative easing program on Jan. 22, 2014, the main European benchmark for stocks SXXT, -0.96% have benefited, rising nearly 9% (in euro terms) in the lead up to the official launch of Europe’s bond-buying program on Monday. But it isn’t just European stocks that stand to benefit. U.S. equities are also in line to reap the benefits of ECB’s QE thanks to the dynamics of weaker euro/stronger dollar, buybacks and dividend yields. “Insurance companies and pension funds will search for yield and will turn to European corporate debt as well as U.S. corporate debt,” said Thomas Droumenq, head of equities at Société Générale. “Corporations will use the proceeds of debt to buy back shares, pushing up the prices,” Droumenq said. “QE is essentially cheap money and negative yields do not matter. Banks will be able to make money in the spread regardless of the positive or negative yields,” the SocGen official noted. Meanwhile, the stronger dollar attracts international investors interested in dollar-denominated assets such as Treasurys, corporate bonds, and stocks. Even the strong rally in European stocks, present selling excluded, looks mediocre when converted into dollar terms. The chart below illustrates how much the strong dollar has eroded the returns of foreign stocks over the past 12 months: “The stronger dollar will no doubt damage some of the profits of U.S. multinationals, but money flows will more than compensate for that,” said Jonathan Golub, chief U.S. equities strategist at RBC Capital Markets. “In fact, we expect that stocks will rise this year primarily due to P/E expansion,” Golub added, referring to the fact that pricey stocks may get pricier. The RBC equity strategist argues that valuations in the S&P 500 still have room to grow given that the economy continues to improve at a slow, but steady pace. Negative yields of European sovereign debt that have become prevalent are a cause for concern for some market watchers. “Buying negative yields is like kicking the can down the road. Eventually it stops working. Simple math does dictates that it does not work,” said Lance Roberts, portfolio manager at STA Wealth Management. However, Roberts is fully allocated to international equities but cautioned investors to pay attention to stock values. “We are playing with a very close trigger,” Roberts said. Anora Mahmudova