Europe is missing the cool stocks
This year, too, it becomes clear that European equities can not keep up with the pace of US assets . This is mainly because tech stocks are the darlings of investors and are often listed on Wall Street .
Ongoing boom in tech stocks
Once again this year, companies like Twitter and Netflix were able to grow more than 80 percent , at least when it comes to market capitalization on the stock market . For this reason, it is easy to explain the outperformance that the US stock exchanges recorded this year. According to Max Kettner , a cross-asset strategist at Commerzbank , it is above all the "cool tech stocks" that are missing in Europe.
Also, a close look at the evolution of the major indices shows that there is an imbalance in performance . Thus, the S & P 500 has gained about two percent in the year to date, while the Stoxx Europe 600 lost about two percent . If the S & P 500 is considered without technology values, the difference clearly drops and a loss of 0.9 percent arises. It must also be remembered that European technology stocks were able to deliver an extraordinary performance this year. The share in the Stoxx Europe is only 4.7 percent . Technology stocks in the S & P account for around 26 percent of the total index.
Development of the euro is not price supportive
However, the more conservative development can also be linked to other indicators. This includes, for example, rather weak earnings growth when compared directly to US developments. In particular, political uncertainty from Italy, Spain and Germany is unsettling investors. At the beginning, analysts hoped for an outperformance of European equities , fueled by a sinking euro exchange rate. In particular, export values should benefit from the weakening currency . For the Member States of the EU, especially for Germany , this would be a positive development as most of the goods are exported . If it goes to Kettner, however, this hypothesis has so far not come true . This is mainly because investors put a stronger emphasis on negative news releases , which are responsible for the euro weakness . Above all, the impending escalation in the tariff dispute should be mentioned, which is becoming a risk for export-strong companies.
Nevertheless, a look must also be made at the historical development of the various indices . This is also not particularly positive for Europe, because while the S & P 500 was able to gain about 120 percent in the last ten years, the Stoxx Europe 600 could only realize an increase of 34 percent over the same period. In addition, according to expert forecasts, European earnings growth this year is at 6.1 percent and 8.6 percent next year. By contrast, US companies are expected to achieve a 23 percent increase in profits this year and 11 percent next year. However, this difference becomes smaller if technology values are removed from consideration. If the indices are rated in terms of the various industries , the difference is smaller and the valuation fairer. Nevertheless, there remains a difference in earnings growth , because in general, especially US companies can realize a higher profit growth . Among other things, this can be explained by the lower taxes that were passed last year.