Equity Markets: U.S. Regains Momentum Over Europe
There appears to be a new shift on the horizon between U.S. and European equities. After a period of strength for the stock markets of the Old Continent, Wall Street now seems to be gaining more momentum.
The chart above shows the one-year performance of the relative strength ratio between the S&P 500 and the Eurostoxx 50 (both denominated in U.S. dollars). Three distinct phases can be observed.
The first phase, from autumn 2024 to early 2025, saw U.S. equities outperform their European counterparts. The second phase, from early 2025 to May 2025, marked a reversal in favor of European equities. Lastly, there is the current, third phase, in which U.S. stocks appear to have regained strength, while European equities are weakening.
While U.S. markets are showing signs of strength and returning to yearly highs, Europe is going through a phase of weakness—though without any structural warning signs and still trading at a discount compared to U.S. stocks. For now, the medium-term trend still favors European equities, but it is clear that investors—reassured on the tariff front and awaiting the next moves from the Fed—are also beginning to reposition toward U.S. equities.
