European stocks finally break losing streak against US

For the last 15 years, US stocks have handily beaten their European counterparts, as the US economy has registered solid growth, while Europe has struggled. 

During that period through Dec. 31, the S&P 500 index surged 517%, compared to a 175% gain for the Stocks Europe 600 index. 

But now the tables are turned. So far this year, the S&P 500 has sunk 6.1%, while the Stoxx 600 has gained 5.8%.

The US move stems from concern that tariffs will tank the economy. Goldman Sachs just lowered its forecast for 2025 US GDP growth to 1% from 1.5% previously. Growth totaled 2.5% in 2024. Goldman now sees a 35% chance of recession in the next 12 months, up from 20% previously.

It’s not that Europe’s economy is going gangbusters. The eurozone economy expanded only 0.7% last year. And the European Central Bank isn’t forecasting much improvement for this year – 0.9%.

But until the turmoil surrounding tariffs, many analysts were enthusiastic about the US economy. Meanwhile, they were already glum about Europe, so now Europe looks better relative to the US.

A good 60 days for European stocks

For a recent 60-day period (Jan. 16 to March 17), the Stocks Europe 600 climbed 5.9%, while the S&P 500 dropped 4.4%.

That’s the first 60-day period in which the S&P 500 fell at least 3%, the Stoxx Europe 600 gained at least 3%, and Stoxx outperformed the S&P by at least 10% since 2000, according to Deutsche Bank. That also happened in 2000, 1997 and 1989-90. 

You may be curious what the investment environment was like in those prior periods. In 2000, the “dot com” bubble for Internet stocks, which had expanded for about five years, burst. This pushed the S&P 500 down 10.1% that year. 

Europe didn’t exactly crush it, with the Stoxx index slipping 3.8%. But that was obviously a much better performance than the US. The difference came largely because technology stocks played a much smaller role in European markets than in the US. 

More market history

In 1997, Europe benefited from falling interest rates and a falling euro. The Stoxx 600 surged 41%. The US wasn’t chopped liver amid strong economic growth and the growing technology bubble. Stocks just didn’t soar quite as much as in Europe, with the S&P 500 gaining 33%.

As for 1989-90, Europe benefited from the fall of the Berlin Wall in November 1989, which sparked European unification. Meanwhile, the US fell into recession in July 1990, sparked in part by the crisis of savings and loan institutions. 

As for the present, two months, of course, doesn’t make a trend. It’s anyone’s guess as to how European and US stocks will perform going forward. But it’s always good to keep in mind that the pendulum can swing both ways when it comes to which geography’s stocks do better.