Surprising European Market Surge as Wall Street Slips: The financial markets are witnessing notable shifts in investor behavior.
Following the return of so-called “meme stocks” to the spotlight
With notable surges in shares like Krispy Kreme and Kohl’s, individual investors seem to have rediscovered their risk appetite,
hoping to secure returns that surpass even those of the S&P 500.

However, this enthusiasm for U.S. stocks is being matched
and in some circles surpassed — by a deeper and more sustainable trend:
A reallocation of capital toward Europe.
Many investors are betting that European equities will outperform their American counterparts over the medium term,
driven by diversification strategies and opportunities beyond the United States.

Contents

European Defense Companies

Market Performance

European Indices

Leading European Companies

New Investors

Financial Advisors

Valuation of European Assets

International Investment Gains Momentum Amid Dollar Weakness

This conviction resurfaced last Friday, as the S&P 500 declined and the U.S. dollar
weakened following disappointing labor market data
developments that have bolstered the appeal of foreign investments, particularly in European markets.

European Defense Companies Lead the Scene

Policies introduced by former U.S. President Donald Trump under the “America First” agenda
have spurred EU leaders to ramp up military spending, energizing Europe’s defense sector.
As a result, the market value of Rheinmetall (Germany) more than tripled,
while Leonardo (Italy) nearly doubled in dollar terms.

Samuel Novzenker, managing director at New York-based trading platform Public Holdings, noted:

“Investors who shifted to global equities are sticking with their positions,”
adding that interest in meme stocks is fading as price momentum — a key driver for individual investors — stalls.

Market Performance Reflects Shifting Sentiment

The S&P 500 rose by 6.1% from the beginning of 2025 through the end of last week.
But that pales in comparison to European markets, where the DAX (Germany) soared by 31%
and the FTSE 100 (UK) jumped by 17%, both in dollar terms.

This striking performance contrasts sharply with the previous 15 years,
during which American assets reigned supreme.
Now, shifting geopolitical and economic dynamics are eroding investor confidence in U.S. markets,
prompting a renewed interest in international exposure.

European ETFs Attract Record Inflows

According to Bloomberg Intelligence, exchange-traded funds (ETFs) tracking European markets have attracted
more than $12 billion in inflows since the beginning of the year
putting them on track for their best annual performance since 2021.
The standout performer has been the Vanguard European ETF (VGK),
which alone pulled in over $5 billion, reversing outflows of about $2 billion last year.

Surge in Leading European Stocks

Data from Public Holdings shows that half of the growth in non-U.S. ETFs has gone to European-focused funds.
This year’s top-performing individual stocks are BNP Paribas SA (France),
Nordea Bank Abp (Finland), and blue-chip names like Nestlé, Bayer AG, and Adidas.

New Investors Turn Their Attention to Europe

Paul De Santis, a 40-year-old investor from New Mexico, began focusing on European markets in 2022
When the war in Ukraine boosted defense stocks.
He says his investment in Rheinmetall has become something akin to a meme stock and holds a position in Leonardo.

In Tampa, Joseph Bigonis, 38, placed bets on various European stocks,
including Banco Santander (Spain) and Deutsche Telekom (Germany)
despite never having visited Europe.
He invested around $10,000 in the Vanguard European ETF after listening
to a podcast discussing Europe’s strategic advantages amid U.S. political turbulence.

Bigonis stated: “There’s about $800 billion earmarked for the European defense sector by NATO and the EU. I believe in following the money.”

Financial Advisors Encourage European Exposure

Despite the S&P 500 hitting record highs, the dollar’s weakness has led many financial advisors
to encourage their clients to increase their exposure to European equities
not just for potential gains but also to diversify their portfolios,
According to Jeff McDermott, owner of Create Wealth Financial Planning.

Europe Still Offers Value

Some believe U.S. stocks are now overvalued after years of strong performance.
This view resonates with Lea Holmgren, an investor based in Miami,
who has invested this year in Rheinmetall, Leonardo, and the Vanguard European ETF.

Holmgren commented: “Europe has had a tough decade,
which means there’s real value there. Prices haven’t yet become overblown.”

Surprising European Market Surge as Wall Street Slips

Surprising European Market Surge as Wall Street Slips

Related Topics