Europe’s stock market has a reputation problem. Investors have long treated the region as an afterthought next to Wall Street and fast-growing Asian markets, yet its benchmark index has quietly kept pace with, and at times beaten, the S&P 500.
That reputation is not entirely undeserved. Europe has fewer high-growth companies, shallower capital markets, and a long-term earnings outlook that has rarely rivaled the U.S. or Asia’s fastest-growing tech hubs, which is part of why its recent run has gone largely unnoticed.
Europe’s Underappreciated Rally
The Stoxx 600, which tracks 600 large, medium and small-cap companies across 17 European countries, is up 11% so far in 2026, trailing the S&P 500’s record run of 13.2% over the same stretch. That figure covers 2026 alone, though.
Widen the lens to include 2025, when a surge in government spending across the continent jolted European markets back to life, and the comparison flips.
Goldman Sachs argued in an Aug. 10 note that the market has misjudged Europe for years on exactly this basis. Since 2022, the bank said, European banks have significantly outpaced the Magnificent Seven, the group of dominant U.S. tech companies including Apple, Microsoft and Nvidia.
And despite a tariff shock and an energy supply crisis, the Stoxx 600 has still come out ahead of the S&P 500 since the start of 2025.
Performance [in Europe] has been far more mixed than the market narrative, or most investors realize.
Goldman
The bank also pushed back on the idea that Chinese competition threatens European equities broadly. Financials, pharmaceuticals, technology, energy, utilities, telecoms, and aerospace and defense make up the bulk of the index and face little exposure to low-cost Chinese imports.
Autos, the sector most associated with that threat, account for just 1% of Europe’s total market capitalization, though the Stoxx 600 rally has largely bypassed the group. The Stoxx Autos index has fallen 16% this year, with Volkswagen down 27.6% and Stellantis down 51.9%, as slowing electric vehicle demand and higher borrowing costs weigh on the sector.
AI Trade Positions Europe as a Hedge
BNP Paribas sees opportunity precisely where the pain has been sharpest. Sophie Huynh, a portfolio manager and strategist at the firm, told CNBC that Europe is more likely to benefit from artificial intelligence adoption than to develop the technology itself, with autos among the sectors positioned to gain.
It’s about trying to understand when markets are going to start talking about this because you can sit on these deep value sectors for one or two years before the market consensus starts to realize it’s going to work.
