U.S. stocks have caught up with European stocks in terms of returns. Is it worth going back to the US?

While back in March the European stock index STOXX 600 outperformed the US S&P 500 by 10 percentage points, they are now showing almost identical returns since the beginning of the year. Should investors, who were protecting themselves from risks in the U.S. market against the backdrop of the White House's new trade policy, return to the U.S.?

European stocks have made a strong start to 2025, overtaking the U.S. stock market amid volatile politics in America and a sweeping budget overhaul in Germany, Reuters reports. In March, the pan-European STOXX 600 stock index outperformed the U.S. S&P 500 by 10 percentage points. Against that backdrop, optimists in Europe spoke of a turning point for European stocks after years of lagging U.S. stocks. However, by early July, U.S. stocks had already not only recovered but also slightly outperformed European stocks. Since the beginning of the year, the S&P 500 is up 6.8% and the STOXX 600 is up 6.4%.

Wall Street began to recoup losses as early as mid-April - in part because Donald Trump's trade war has moved into the negotiation phase, said Maria Veitmane, head of equity research at State Street Global Markets. However, the "real turning point," she said, was the corporate reporting season in April, when IT companies confidently reported strong results. The technology sector, which makes up about a third of the S&P 500 Index, is up 24% since the start of April - even with the drawdown after the trade war began. And Nvidia, once again the world's most valuable company, has since gained even more - 45%. There are no analogues of such growth in Europe, Reuters emphasizes.

Despite the new records of S&P 500, part of investors are not in a hurry to return to Wall Street: high valuations of U.S. stocks cause them concerns, notes Reuters. "The duty story showed how quickly [market] sentiment can change and how risky such high valuations are," said Madeleine Ronner, senior equity portfolio manager at DWS. European equity multiples look more reasonable compared to U.S. equities, she said, and European companies' earnings per share are starting to rise, closing the gap with the United States. DWS also expects GDP growth rates in the U.S. and EU to be about the same between 2025 and 2026, providing sustained support for European company earnings.

Whether Europe will continue to outperform the US now depends on the course of trade negotiations and America's new fiscal policy, according to Max Castelli, head of global sovereign markets strategy at UBS Asset Management. "I don't think the phenomenon of exceptionalism in U.S. equities will return with the same vigor and intensity," he said. - But I wouldn't rule out that the stage where European assets are strongly outperforming U.S. assets has already passed, either."

This article was AI-translated and verified by a human editor