After 2 years of America’s extraordinaryness, Europe Stock +10% YTD vs +4% for America
For the last few years, the story for equity globally has been one of the “American extraordinaryness”, where American stocks have made a lot of changes to other markets, in large parts US-based (and Nasdaq-list) Mag7K Thanks for.
Over 2023 and 2024, US Equities received more than +59% – double +24% profit of Europe (measured by both large and middle cap’s MSciindices).
To start 2025, however, America is not so extraordinary.
In fact, it is Europe that is doubling America with +10% (below chart, gold line) in Europe compared to +4% (blue line) for the US.
Europe’s lead is wides
And this is not just one thing. If we look at the returns this year by sector (below chart) this year, Europe (Gold Bars) is defeating America (Blue Bars) in 7 out of 11 regions, and they essentially two more (materials and real Are tied in Estate).
Hence the leadership of Europe is widespread.
AI exposure, high-logger rate, and “expensive” evaluation big headwind for us
There are some different reasons that America has lagged behind in Europe:
- We have a lot of contact with AITech MSCI is 40% of the USA compared to just 10% for Europe. For the last 2 years, it was in favor of America, Mag 7 benefits with AI optimism helps +156%. But Mag 7 is flat this year, as the low cost of Deepsac, high performance model stated that AI optimism (and planned $ 300BN of Big Tech spent $ 300 billion on AI this year). Europe, however, is more inclined towards financial, health care and industrialism.
- The US is facing high-levy rates as cuts in Europe. This year the markets are pricing only 40bps in the fed cut, while compared to 120bps from the European Central Bank (including 25bps cut they have already done). Therefore, the European economy is expected to boost higher than rate cuts.
- Europe “cheap” is our relative. The price/income assessment ratio of the US is more than 22-Cowd and Dotcom Bubble is close to the record high of the highs of Europe and the PE of Europe is just more than 14-close to the average of 20 years and about two-thirds of America’s PE . So Europe’s stocks are relatively “cheap” compared to America. In addition, high rate (#2) makes high PE hard because the cost of high lending makes the future hard to feel.
- European earnings more than recession. After seeing the fall of earning -2% in 2024, MSCI Europe is expected to see an increase in income +7% this year. However, it receives the US’s estimated +13% income benefit.
Nevertheless, outside the dimming of AI optimism, most of these factors were already to start the year.
Therefore, this is a story in Europe (after acquiring just +2% last year) is slower than the US. After all, MSCI USA is below its all -time high (set in January), and +4.3% profit in six weeks is not very bad.
The above information is provided only for informative and educational purposes, and nothing contained here should be done as an investment advice on behalf of any particular safety or overall investment strategy. Neither Nasdaq, Inc. Nor does any of its colleagues recommend to buy or sell any security or any representation about the financial situation of any company. Nasdaq- Statements about listed companies or NASDAQ ownership index are not guaranteed future performance. Real consequences may vary physically from those expressed or implied. Past performance is not indicative of future results. Investors should evaluate their own proper hard work and careful companies before investing. Advice from a securities professional is strongly advised. © 2024. Nasdac, Inc. All rights secure.
