Secret outperformer: Dispelling the 'myths' about an unloved stock market

Map of Europe European equities have historically struggled to ignite the kind of investor enthusiasm enjoyed by U.S. stocks and certain fast-growing Asian markets. The continent has fewer high-growth companies, shallower capital markets, and is thought to have a less compelling long-term earnings growth story. However, a spike in governments' fiscal spending at the beginning of 2025 brought the market to life. This year, the story is more nuanced, but the pan-European Stoxx 600 index has proven remarkably resilient. The Stoxx 600 tracks 600 large, medium, and small-cap companies across 17 European countries, serving as Europe’s equivalent to the S&P 500. As of 2026, the Stoxx 600 is up 10% year-to-date, slightly behind its North American counterpart, which has returned 13.5% over the same period. Goldman Sachs recently attempted to dispel myths about investing in Europe. Their analysis reveals that European banks have outperformed the Magnificent 7 since 2022, and despite challenges like tariff shocks and energy supply crises, the Stoxx 600 has outperformed the S&P 500 since 2025. Goldman also debunked the notion that Chinese competition is a major headwind for Europe’s companies, stating that sectors like financials, pharma, tech, energy, utilities, telecoms, aerospace, and defense are not especially vulnerable to low-cost imports. The autos sector, however, has been severely impacted by slowing demand for electric vehicles, market share losses to Chinese competitors, and higher borrowing costs, leading to a 16% year-to-date decline. Volkswagen AG and Stellantis are among the worst performers, with losses of 27.6% and 51.9%, respectively. BNP Paribas believes Europe is more likely to be an AI beneficiary rather than a developer, with the autos sector among those poised to benefit. Sophie Huynh, portfolio manager and strategist at BNP Paribas Asset Management, noted that the sector is currently undervalued and could see market recognition within a year or two. She also highlighted that momentum in the U.S. economy is already priced in, suggesting Europe’s economic recovery is just beginning. Goldman acknowledged that Europe lags in data center rollouts and frontier modeling, which could pose risks for security and long-term productivity. However, the bank’s strategists argue that Europe’s delay in AI adoption may serve as a hedge for investors concerned about China’s competition. The article explores how European equities have defied expectations, outperforming the S&P 500 in key sectors despite structural challenges in the autos industry.