European Stocks Are Still Cheap for a Reason
US equities have outpaced their European peers in the past 15 years. That doesn’t mean it’s time to switch.
The grass isn’t always greener.
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Probably the most underrated skill in finance is knowing when to sell. Most of the focus is on what and when to buy, but crystallizing gains before they evaporate is the mark of a successful fund manager. So after 15 years of US equity outperformance versus Europe, is it time to roll out of an expensive stock market and look across the Atlantic? The short answer is no, because the relative strengths of the respective economies still favor US stocks.
Investors have made about 10% on US stocks this year, double what’s available in Europe. That’s on a total return basis in dollars, but the picture is roughly the same either in euros or when measured in local currencies. On a 15-year horizon, the divide is even more extreme, with money invested in the benchmark US index increasing fivefold versus less than a doubling in Europe.