There is a line every American investor has heard some version of: vacation in Europe, never invest there. It was good advice for about twenty years. It is now the kind of advice that costs money, and the reason is arithmetic rather than sentiment.
European companies in the benchmark Stoxx Europe 600 index grew earnings per share by 18% on average last quarter compared with a year earlier. For context, earnings barely grew at all in 2024 and 2025.
The obvious objection, handled
Yes — a chunk of that came from energy companies like BP and Shell, which have benefited from the higher oil and gas prices caused by the Iran war. Strip them out entirely and European earnings still grew 7%, according to Goldman Sachs’s senior European equities strategist.
Seven percent is not thrilling by American standards. It is also not zero, and zero is what the last decade of pricing assumed.
The part that matters for a retirement account
Here is the number to write down. Technology makes up about a tenth of the European index. It makes up around 40% of the S&P 500. Emerging markets are not the alternative people think they are — because that index includes Taiwan and South Korea, it also runs about 40% technology.
So if the thing that worries you is an artificial-intelligence bubble — and after a week in which the semiconductor complex fell on rising bond yields, that worry has evidence — Europe is a more genuine hedge than emerging markets. Not because Europe is better. Because it is different.
| Index | Technology weight | Year to date |
|---|---|---|
| S&P 500 | ~40% | +12.1% |
| Stoxx Europe 600 | ~10% | +10% |
| MSCI Emerging Markets | ~40% | Not a diversifier from tech |
What is actually working over there
Not what you would guess. Growth has widened out beyond a narrow group of artificial-intelligence and bank stocks, according to the head of European equity strategy at UBS, into government and private spending on infrastructure, energy security and defense.
Some specifics from the Journal’s reporting: a French supplier of chip-making materials up 373% this year; an Austrian printed-circuit-board maker booming; industrial names benefiting from data-center demand for gas turbines and power-management equipment; and an Italian maker of underground and submarine power cables up 44% on the electrification push, because Europe has to electrify to stop importing so much energy.
And the laggards have shrunk. Carmakers and auto-parts makers are getting hammered by Chinese competition — but they now make up less than 2% of the index, so they can no longer drag the whole thing down.
The honest caveats
Europe still has real problems: overreliance on imported oil and gas, dense regulation, and consumers who are saving rather than spending. Alcohol companies like Diageo and Pernod Ricard are trading at valuations last seen in the 2008 financial crisis, which is not a compliment.
And this is not a call to move your portfolio to Europe. It is a case for owning some, as an offset, in a plan that has quietly become 40% technology without anyone deciding that it should be.
Money is starting to notice: last week was the first time since February that weekly inflows to Europe equity funds topped $1 billion. That is early, not late. Which is generally when this conversation is worth having.