Secret outperformer: Dispelling the 'myths' about an unloved stock market
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- The Stoxx 600 is up 10% year-to-date in 2026, trailing the S&P 500's 13.5% return over the same period, though Goldman Sachs noted the European index has outperformed the S&P 500 since the start of 2025 "despite both the tariff shock and an energy supply crisis."
- Goldman Sachs, in an August 10 note, pushed back on the "myth" that Chinese competition is a major headwind for European companies, pointing out that autos are just 1% of Europe's market cap and that the index's largest sectors—financials, pharma, tech, energy, utilities, telecoms, aerospace and defense—"are not especially vulnerable to low-cost China imports."
- European banks have "considerably outperformed" the Magnificent 7 since 2022, according to Goldman, undercutting the assumption that U.S. tech mega-caps have been the period's runaway winners.
- The Stoxx Autos index is down 16% year-to-date, with Volkswagen AG off 27.6% and Stellantis down 51.9% as the sector endures slowing EV demand, lost share to Chinese rivals and higher borrowing costs well below pre-pandemic sales volumes.
- Sophie Huynh, portfolio manager at BNP Paribas Asset Management, said Europe's autos sector is "so cheap that no one is really thinking about the potential upside" and noted that positive U.S. consumption news is already priced in, "so the momentum of the U.S. economy is slowing down when Europe has just started to pick up."
- Europe trails the U.S. on data center rollouts and frontier AI modeling, Goldman acknowledged, but the bank suggested that lag serves as a hedge for investors worried about AI risks, particularly around Chinese competition.
Why it matters: Investors who have written off European equities based on the dominant U.S.-growth narrative may be overlooking a quietly resilient trade: a Stoxx 600 up 10% YTD in 2026, European banks beating the Mag 7 since 2022, and autos names trading at deep-value levels (Stellantis down 51.9% YTD) where BNP sees upside that markets haven't yet repriced.
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