European Stocks: The Old Contient is Beating Wall Street
FRANKFURT – For over a decade, the narrative on trading floors was simple: “Don’t bet against the American tech giant.” But as we move through the first quarter of 2026, that script has been decisively flipped.
In a stunning reversal of long-term trends, European equities didn’t just participate in the 2025 bull market—they led it. While the S&P 500 and NASDAQ-100 posted respectable gains of 17.9% and 22.4% respectively, the MSCI Europe Index surged by over 33%, marking its best year in recent memory. Now, two months into 2026, the Vanguard FTSE Europe ETF (VGK) is already up 7.03% YTD, signaling that this isn’t a “flash in the pan,” but a structural shift in global capital.
Great Stock Valuation Gap
The “European Renaissance” is being fueled by a brutal reality for US investors: Wall Street has become expensive. Even after the 2025 rally, European stocks continue to trade at a significant discount – nearly 35% cheaper than their US counterparts on a forward P/E basis.
“We are seeing a massive rotation,” says one senior analyst at Frankfurt’s Deutsche Börse. “In 2024, everyone wanted ‘Growth’ at any price. In 2026, the market wants ‘Value’ with visible earnings. Europe, with its heavy weighting in Financials, Industrials, and Energy, is the only place providing that at scale.”
The "New Guard" of Outperformers
The stars of this rally aren’t just the “Granolas” of old. A new tier of outperformers has emerged, led by the semiconductor giant ASML and a resurgent banking sector. UniCredit, the Italian banking titan, was a standout of 2025, surging over 85% as it benefitted from a “goldilocks” environment of high interest rates and aggressive capital returns.
Meanwhile, the energy transition has turned former laggards into leaders. Siemens Energy and Rheinmetall (defense) have become the “Magnificent 2” of the DAX, with backlogs stretching into the next decade.
Top European Outperformers: 2025–2026
| Stock | Ticker (Primary) | 2025 Context | 2026 Catalyst |
| ASML Holding | ASML | Rebounded +80% from 2024 lows. | Record €38.8B backlog; 2026 revenue guidance raised. |
| UniCredit S.p.A. | UCG | Up ~86% in 2025; top bank in EU. | Aggressive M&A rumors and record dividend yields. |
| Siemens Energy | ENR | Orders reached a record €146B. | Dominating global grid and electrical infrastructure. |
| Rheinmetall | RHM | Defense spending surge drove 40%+ gains. | Multi-year European defense contracts providing stability. |
| SAP SE | SAP | Cloud revenue grew 25% YoY. | AI-integrated ERP upgrades are driving a new cycle. |
European Stock Outlook for 2026
The momentum shows no sign of cooling. As the ECB continues its path of cautious rate cuts, European stocks are beginning to feel the “tailwind” of cheaper credit just as US tech valuations face increased scrutiny. For investors holding VGK or the SPDR EURO STOXX 50 (FEZ), the “Old Continent” looks remarkably new.
