2024’s Equity Roller‑Coaster: The US Carries the Cash Load
When the calendar flips to 2025, most investors will lean over their coffee mugs and grin: the past year was a leaner-than‑expected jackpot for stocks. But it wasn’t all rainbows and sunshine—there were some stark international plot twists.
US Equities: The Heavy‑Hitters
Take the iShares Core S&P 500 ETF. It practically did a happy dance, delivering an almost 34% return in 2024. Meanwhile, the iShares STOXX Europe 600 ETF clinked its champagne glass once and tossed an ~9% total. The difference? A landslide.
Why the U.S. Rules the Day
- In the MSCI World Index, U.S. stocks now account for a whopping 74% of the big picture.
- So, if you’re building a “global” portfolio, you’re already sitting on a large share of U.S. equity.
- Yet, many of Saxo Bank’s clients—especially those rooted in Europe—find themselves frowning at a surprisingly hefty tilt toward European stocks.
Bottom Line: Balance Is Key
Investors can celebrate the robust performance of American markets, but a globally balanced strategy must keep an eye on regional disparities. Europe’s cooler gains might look like a small bowl of salad next to the U.S. feast, but they’re still an essential garnish in the world equity menu.
Investors shows strong overweight in European equities
Why Europeans Are Chasing Their Own Backyard
According to fresh data from Saxo, a bunch of global investors—yes, all the folks outside of Denmark—are putting the bulk of their bets on European stocks. In fact, 46 % of their equity exposure is all the way home, while only 36 % goes to the U.S.
That Old “Home-Bias” Boomerang
- Think of it like the last time you grabbed a sandwich from your kitchen instead of throwing it in a bag. Comfort, familiarity, and that special sauce you’re fond of—it’s all about that brain‑instinct for home.
- Humans theoretically have a built‑in “M|e|o” (love of familiar markets) that makes everyone feel the spots of native currency, regulation, and local naming conventions.
Wait, What About the U.S.?
Interestingly, that “home‑bias” doesn’t mean people are ignoring the U.S. entirely. It might actually hint that many investors think the American market is doing a wobbling-top dance, heading toward a possible “topping.” So while they’re not ditching U.S. equities entirely, they might be waiting for the sweet, sweet moment that feels like the market is, literally, at its peak.
Bottom Line: A Shift on the Horizon
So, when you see those portfolios tilting towards European stocks, remember that behind the numbers there’s a narrative—some folks trust their local market’s feel-good vibes, while others keep an eye on the U.S. for that fine-tuning moment. And who knows? Maybe the U.S. will soon step on the “stop” sign, and European investors will lean into the next wave.
But is pro- Europe a good or bad investment strategy?
Why the U.S. is Still the Show‑Stopper (but Europe’s Not Dropping the Act)
Oskar Bernhardtsen, the sharp‑eyed investment strategist from Saxo, gets straight to the point: putting too much faith in U.S. equities while keeping a lighter hand on European and Danish shares was a misstep in 2024. The headline reason? The U.S. component of the market was snatching up more of the earnings pie.
Crunching the Numbers: EPS – the Real Deal
EPS, or earnings‑per‑share, basically tells if a company’s profitability is creeping up. In 2024, the S&P 500 is slated to see roughly 10% growth in EPS, while the STOXX 600 Europe Index is only hunting for a modest 2% bump. That’s a pretty wide gap.
Why Might Europe Be Just The New Hot‑Topic?
- EPS in Europe is projected to shoot up next year, pulling the stats closer to the U.S.
- European stocks, at present, sit at lower valuations relative to their expected 2025 earnings—almost like a bargain at a discount store.
- With earnings on the rise and the price tag feeling softer, European shares could become the next big catch.
Bottom Line: Stay Prepared, Not Foolish
In short, keep a keen eye on the U.S. for now, but don’t scoff at Europe. The shifting landscape could sway a lot of capital next year, and those who’ve kalch‑checked the numbers early will have an edge.
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