EuroStoxx 50 exceeded the S&P 500 in the 1st 5 months of 2021

The European stock market also likes the American investor this year. According to Morningstar, American investors have invested 2,800 million dollars in funds, and ETFs focused on this market in the first four months of the year. 

The EuroStoxx 50 exceeded the S&P 500 in the first five months of the year, unprecedented since 2017. In May, the survey carried out by Bank of America among professional investors from around the world reflected that the eurozone is the more overweight region in portfolios at the moment, ahead of emerging markets and also the US.

The catalysts in favor

Analysts say there are many factors for Europe to behave better than the United States this year. They refer directly to the composition of the European indices. With a more significant bias towards cyclical sectors compared to the United States. 

The most massive vaccination is now reaching Europe. The reopening of European economies is somewhat late, so in the second part of the year, we can see good numbers in companies that are more dependent on European GDP.

One reason that penalized the Old Continent in recent years – such as not having too much technology in its indices now plays in its favor. It is less sensitive to the sustained upturn in inflation over time. Among other things, they are affected by the increase in interest rates. Excessive inflation remains a remote threat in Europe, where significant output gaps remain the main task for the ECB.

Moreover, in Europe, the recovery funds have not been supported yet, and it is money that will transform economies. The interest rate policy is still very accommodative. The economy is going to have the first part of recovery and then another of expansion.

Entering the European stock market today is also cheaper than investing in the American one, although it has risen more this year. The profitability expectation of the European stock market is also higher, reaching 5.39% compared to 4.43% for the American one.

Due to all of the above, investors tend to prefer regions with greater weight in value. These include Europe, the United Kingdom, and Japan.