{"id":150998,"date":"2025-03-23T04:37:02","date_gmt":"2025-03-23T04:37:02","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/finance\/european-exceptionalism-nasdaq\/"},"modified":"2025-03-23T04:37:02","modified_gmt":"2025-03-23T04:37:02","slug":"european-exceptionalism-nasdaq","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=150998","title":{"rendered":"European Exceptionalism? | Nasdaq"},"content":{"rendered":"


\n<\/p>\n

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After 2 years of US Exceptionalism, Europe stocks +10% YTD vs. +4% for the US<\/strong><\/p>\n

For the last couple years, the story for equities globally has been one of \u201cUS Exceptionalism,\u201d where US stocks have significantly outperformed other markets, in large part thanks to the US-based (and Nasdaq-listed) Mag 7.<\/p>\n

Over 2023 and 2024, US equities gained +59% \u2013 more than double<\/em> Europe\u2019s +24% gain (both measured by the MSCI<\/a>indices<\/a> of large and mid caps).<\/p>\n

To start 2025, though, the US hasn\u2019t been so exceptional.<\/p>\n

In fact, it\u2019s Europe that\u2019s doubling up the US, with the MSCI Europe up +10% (chart below, gold line), compared to +4% for the US (blue line).<\/p>\n

\n
\n
\n\"MSCI<\/p>\n

<\/source><\/source><\/source><\/picture>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n

Europe\u2019s lead is broad based, beating the US across 7 of 11 sectors, tied in 2 more<\/strong><\/p>\n

And it\u2019s not just one thing driving it. If we look at returns this year by sector (chart below), Europe (gold bars) is beating the US (blue bars) in 7 of 11 sectors, and they\u2019re essentially tied in two more (Materials and Real Estate).<\/p>\n

So Europe\u2019s leadership is broad based.<\/p>\n

\n
\n
\n\"MSCI<\/p>\n

<\/source><\/source><\/source><\/picture>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n

AI exposure, higher-for-longer rates, and \u201cexpensive\u201d valuations bigger headwinds for US<\/strong><\/p>\n

There are a few different reasons the US has lagged Europe:<\/p>\n

    \n
  1. US much more exposed to AI<\/strong>. Tech is 40% of the MSCI USA compared to just 10% for Europe. For the last 2 years, this favored the US, with AI optimism helping the Mag 7 gain +156%. But the Mag 7 is flat this year, in part because DeepSeek\u2019s low cost, high performance model tempered that AI optimism (and the wisdom of Big Tech\u2019s planned $300bn<\/a> spending on AI this year). Europe, though, is tilted more towards Financials, Health Care, and Industrials.<\/li>\n
  2. US facing higher-for-longer rates as Europe cuts.<\/strong> Markets are only pricing 40bps in Fed cuts this year, compared to 120bps from the European Central Bank (including the 25bps cut they already did). So the European economy is expected to get more of a boost from rate cuts.<\/li>\n
  3. Europe \u201ccheap\u201d relative to US.<\/strong> The US\u2019s Price\/Earnings valuation ratio is over 22<\/a> \u2013 close to record highs during Covid and the Dotcom bubble \u2013 while Europe\u2019s PE is just over 14<\/a> \u2013 close to its 20-year average and about two-thirds the US\u2019s PE. So Europe stocks are relatively \u201ccheap\u201d compared to the US. Plus, higher rates (#2) make it harder to sustain high PEs since higher borrowing costs make future earnings harder to realize.<\/li>\n
  4. European earnings recession over.<\/strong> After seeing earnings fall -2% in 2024, the MSCI Europe is expected to see earnings rise +7% this year. Though that trails the US\u2019s projected +13% earnings gain.<\/li>\n<\/ol>\n

    Still, outside of the dimming of AI optimism, most of these factors were already in place to start the year.<\/p>\n

    So, it\u2019s more a story of Europe recovering (after gaining just +2% last year) than the US slowing down. After all, the MSCI USA is just below its all-time high (set in January), and a +4.3% gain in six weeks isn\u2019t too bad.<\/p>\n

    The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. Neither Nasdaq, Inc. nor any of its affiliates makes any recommendation to buy or sell any security or any representation about the financial condition of any company. Statements regarding Nasdaq-listed companies or Nasdaq proprietary indexes are not guarantees of future performance. Actual results may differ materially from those expressed or implied. Past performance is not indicative of future results. Investors should undertake their own due diligence and carefully evaluate companies before investing. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED. \u00a9 2024. Nasdaq, Inc. All Rights Reserved.<\/em><\/p>\n<\/p><\/div>\n\n","protected":false},"excerpt":{"rendered":"

    After 2 years of US Exceptionalism, Europe stocks +10% YTD vs. +4% for the US For the last couple years, the story for equities globally has been one of \u201cUS Exceptionalism,\u201d where US stocks have significantly outperformed other markets, in large part thanks to the US-based (and Nasdaq-listed) Mag 7. Over 2023 and 2024, US […]<\/p>\n","protected":false},"author":1,"featured_media":135806,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[93],"tags":[3162,62950,34885],"dealstore":[],"offerexpiration":[],"class_list":["post-150998","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-european","tag-exceptionalism","tag-nasdaq"],"yoast_head":"\nEuropean Exceptionalism? | Nasdaq - Som2ny Network<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fivemor.com\/?p=150998\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"European Exceptionalism? | Nasdaq - Som2ny Network\" \/>\n<meta property=\"og:description\" content=\"After 2 years of US Exceptionalism, Europe stocks +10% YTD vs. +4% for the US For the last couple years, the story for equities globally has been one of \u201cUS Exceptionalism,\u201d where US stocks have significantly outperformed other markets, in large part thanks to the US-based (and Nasdaq-listed) Mag 7. 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