Over the past few years, the US stock market has performed much better than the European stock market. That is not a secret.
From this graph we can extract some interesting conclusions. As we can see, in the last 15 years, the outperformance of the S&P 500 has been constant: approximately, 80% of the time, the S&P 500 has outperformed the Euro Stoxx in 1-year returns. In addition, this outperformance has been, on average, 10%.
Meanwhile, the times the Stoxx outperformed the S&P 500 (only 20% of the time it did), it was by only 2.5%.
This outperfomance is due to the fact that the profits of American companies are constantly growing, and they recover much faster from crises.
In fact, earnings per share (EPS) of the Stoxx 50 are lower today than in the 2008
Could this trend change?
Well, to answer that question, we have to look at how the two indices are coming out of the covid crisis.
As we can see, during last year's crisis, European companies showed much less resilience, and profits fell much more.
However, this means that, once we return to a "complete" normality, profits will start from a lower point and, therefore, grow more.
In this very atypical year, where we are seeing a rotation towards more "value" companies, such as financial, industrial or energy sectors, there could be an outperformance of the Stoxx 50.
For the moment, the Euro Stoxx surpasses, albeit slightly, the S&P 500 so far in 2021. However, it will be the earnings growth forecasts for 2022 and 2023 that will mark the growth path of the two indices and, as we can see in the last chart, they are quite even in that sense.