European investors should return home
Tactically, European equities are lagging US equities for a long time. And they are relatively cheaper, for example, STOXX Europe 600 ETF price-to earnings (P/E) rounds to 17 compared to 27 P/E of US S&P 500 ETF. That was for a reason, because economic growth stagnated in Europe but slight improvement is forecasted in 2025 and beyond.
Strategically, European economy and equity markets need local investor support when we see unpredictable rhetoric and actions of US Trump administration. If tariff war escalates many global companies would be hurt but there are more global companies in US.
Trump’s team negotiation methods regarding russia’s war in Ukraine should concern European investors as citizens, too. European democracies should and would invest more in defense, that means bigger government spending, usually positive for businesses and economic growth.
Diversification might be another reason, because US equities has grown to 72% share of MSCI World ETF.
What about risk-off scenario? If US equities enter the bull market that would spill over into other markets. Again, would relatively cheaper European equities be more volatile when markets turn down?
This short article is not an investment recommendation nor advise. It only highlights few arguments for the consideration. Investors should advise the licensed financial broker or advisor and they should consider full scale of relevant factors before making an investment decision.