Stock Market: Europe Takes Its Revenge On Wall Street, But For How Long?

It is quite rare to be highlighted: the European stock market is leading the way against Wall Street. While American indices struggle to take off, European markets are booming like a chip shop. Behind this feat, a cocktail of factors: hopes for peace in Ukraine, massive investments in defense, and a market deemed more attractive than Uncle Sam. It remains to be seen whether this dynamic is sustainable or if Europe is just playing the leading roles for a moment.

The European stock market in full swing: toward a new golden age?

This is historic: Europe, hit by an economic crisis , is outperforming the United States in the stock market. The German DAX climbs by 17%, the French CAC 40 by 11.5%, and the British FTSE 100 by 9%. Meanwhile, the S&P 500 stagnates below the 1% mark. Such a gap has not been observed since the year 2000, according to Morgan Stanley .

Trump’s rally fades, leaving Wall Street stocks to pull their global counterparts – Source: Financial Times

Behind this enthusiasm, several factors:

• Prospects for peace in Ukraine reassuring investors;
• A rise in defense spending in Europe;
• An economy that finally seems to be emerging from its slumber;
• European stocks still attractive, with a price/earnings ratio of 14x compared to 22x in the United States.

Europe is also appealing due to impressive investment flows. Kyrylo Shevchenko sums it up well:

” Europe attracts $12 billion in four weeks, a record in a decade. ”

But can this stock market enthusiasm really continue, or is it just a catch-up effect?

Investors are betting on a virtuous cycle fueled by lower interest rates and fiscal stimulus. But there remains a major unknown: is Wall Street really lagging behind or is it just preparing a strong comeback?

Europe redefines its economic model: opportunity or mirage?

The EU is revising its economic approach. Between the retreat of the United States into itself and the urgency to strengthen its strategic autonomy, it is injecting massive capital into defense and infrastructure. The PMI index, which measures industrial and service activity, shows signs of improvement, heralding an exit from stagnation.

Stock market statistics on March 6 – Source: StockWits (X)

One of the drivers of this upswing? The rebound of mergers and acquisitions in Europe, up 20% year on year. Furthermore, the European Central Bank may adopt a more flexible approach to interest rates, unlike the Fed which is cautious.

But not everything is rosy. As noted by a Morgan Stanley analyst:

” The American policy towards Russia and Ukraine could reshuffle the cards of economic alliances. “

Other uncertainties remain: trade tensions with China, the volatility of energy prices, and the real impact of investments in defense. Is Europe reinventing itself or simply compensating for a delay that has built up over the years?

After a week where Europe has outperformed Wall Street , will March be the month of confirmation? Investors are keeping an eye on upcoming monetary decisions and geopolitical developments. Is a sustained shift towards Europe underway?