MW It's been 25 years since Europe stocks beat U.S. rivals this way. Deutsche Bank still prefers MEGA to MAGA.

By Steve Goldstein

It's been 25 years since the last time European stocks have not only outperformed U.S. equities but rose when American stocks fell.

Deutsche Bank is using a 60-day period in which the S&P 500 fell at least 3% while the Stoxx Europe 600 gained at least 3%, and where Europe outperformed the U.S. by at least 10%. The last occurrence before this year was in 2000, and there also were periods in 1997 and near the end of 1989 into 1990.

So the question is whether the outperformance can last - and Deutsche Bank strategists say it can, saying they prefer MEGA - Make Europe Great Again - to the U.S. slogan of Make America Great Again.

Strategists led by Maximilian Uleer, head of European equity and cross-asset strategist at Deutsche Bank, say from the start of the war in Ukraine to the U.S. election, the price-to-earnings ratio difference between the U.S. and Europe increased by 4.5 points. Now, since the election, the P/E gap has already shrunk by 2.7 points, mostly on political uncertainty and the big slump in Magnificent 7 valuations since the emergence of DeepSeek.

Changing expectations for growth and earnings and the possibility of a ceasefire also have played a role.

They say another 1 P/E point in tightening can come from politics and economics, which implies another 6% in outperformance of the Stoxx 600 over the S&P 500.

The Vanguard FTSE Europe ETF VGK has gained 13% this year, while the S&P 500 SPX has retreated by 4%.

S&P 500 futures (ES00) pointed to early gains as the Stoxx Europe 600 XX:SXXP also rose.

-Steve Goldstein

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March 24, 2025 05:39 ET (09:39 GMT)

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