European stock markets have underperformed S&P 500 by a significant margin since 1995. The US stock market, especially the S&P 500 index, prioritizes technology and growth sectors, while European markets focus on financial, energy, consumer, and industrial sectors. The size of the US stock market is much larger, contributing to its dominance.
The US economy has grown dynamically in recent decades, while Europe is still working on establishing a single market and currency zone. The US dollar’s strength as a global reserve currency also plays a role in the attractiveness of the US stock market. This year, the European Stoxx 600 has increased by 5.1%, while the S&P 500 has gained more than 25%.
The US stock market’s attractiveness and stability may continue to increase under President Trump’s protectionist economic policy. The ongoing Russian-Ukrainian war and COVID-19 recovery challenges are factors affecting the European markets.
