European equities (and Japan) have massively underperformed US equities in recent years especially for USD based investors . Not only equities return were poor but currency performance was very weak : – 33% for the EUR against USD since 2008 (-31% since 2011 for the Yen).
Situation has started to evolve since early 2016 with SP500 underperforming Eurostoxx 50 :6.53% vs 8.84 %. Main explaining factors are:
1/ Economic recovery in Europe is gathering pace while some data out of US economy are a bit more on the negative side.
2/ European markets priced (and still partially do ) the risk of populist parties to win major elections with the attached questions about EURO survival. This risk has been reduced with Macron win in first round election in France .
3/ The much cheaper valuation of European equities compared to their US counterparts.
4/ Catch up potential (See Chart Below) and rising interests from US investors seeing risk on their own market and opportunities in others .
Source : The Bespoke IG