Goldman Sachs says European equities have outperformed the S&P 500 since the start of 2025, even after a tariff shock and an energy supply crisis. The bank is pushing back on the idea that Europe's stock market is a laggard, pointing to bank stocks and a market mix less exposed to Chinese competition.
Goldman Sachs analysts used an August 10 note to challenge the narrative that European stocks trail the S&P 500. According to Goldman Sachs: "Since 2022, European banks have considerably outperformed the Magnificent 7." The bank added that since the start of 2025, Europe's Stoxx 600 has outperformed the S&P 500 despite a tariff shock and an energy supply crisis.
Stoxx 600 trails the S&P 500 so far in 2026
This year, the picture flips. The pan-European Stoxx 600 is up 10% in 2026. The S&P 500 has returned 13.5% over the same period.
Goldman argues the longer stretch matters more than this year's gap. Since 2022, European banks have considerably outperformed the Magnificent 7, the bank said, and the case for Europe rests on that multi-year run rather than a single calendar year.
China exposure is smaller than the narrative suggests
Goldman also pushed back on the idea that Chinese competition is a major headwind for European companies. The bank said the largest sectors in Europe's market — financials, pharma, tech, energy, utilities, telecoms, and aerospace and defense — are not especially vulnerable to low-cost China imports, and noted that autos make up just 1% of Europe's market cap.
Autos remain the exception. The Stoxx Autos index is down 16% year-to-date. Volkswagen and Stellantis are among the worst performers, falling 27.6% and 51.9% respectively.
BNP Paribas sees an AI beneficiary, not a laggard
BNP Paribas takes a related view, arguing Europe is more likely to be an AI beneficiary than a developer, with autos among the sectors that stand to benefit. Sophie Huynh, portfolio manager and strategist at BNP Paribas Asset Management, said the sector is cheap enough that the market has not yet priced in its potential upside.
Goldman acknowledged Europe lags on data center rollouts and frontier modelling, which could weigh on security or longer-term productivity and growth. But the bank's strategists said falling behind on the AI trade may not be such a bad thing, since it gives investors a hedge against risks tied to AI, including China competition.
Source: CNBC
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