European Equities: A Resurgent Diversifier

Summary

• In a surprise to many investors, European equities have advanced sharply over the past several months, including significant outperformance relative to U.S. stocks.
• The improved backdrop for European markets reflects a confluence of factors, including a stronger currency and a manufacturing renaissance.
• The onset of the war in Ukraine, and its implications for energy prices and security, hit European stocks especially hard.
• Like other international markets, Europe has benefitted from a weaker U.S. dollar, which peaked in October 2022 after its decade-long rise.
• European companies continue to trade at historically low valuations compared to U.S. peers.

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In a surprise to many investors, European equities have advanced sharply over the past several months, including significant outperformance relative to U.S. stocks. The improved backdrop for European markets reflects a confluence of factors, including a stronger currency and a