Europe – diverse opportunities in the equity market

• Exchange Traded Solutions Switzerland
  BNP Paribas

“Europe is rich in assets and poor in investment” – with this conclusion, the consulting firm McKinsey Global Institute (MGI) published a study a few weeks ago. While large sums of money are being invested in the development of future-oriented technologies in the USA and China, even at the expense of new debt, Europe is holding back. This leads to a situation where, although Europe is in a better position from a balance sheet perspective, the USA and China are ahead in terms of technology.

New initiatives in key technologies

However, one thing should not preclude the other. Precisely because Europe is in a better position balance-sheet-wise, it should invest more, according to the conclusion of the study authors. Said and done. In recent months, the authorities of the European Union have passed numerous initiatives to originate new investments. These initiatives are primarily influenced by the global political situation. Both China and, increasingly, the USA are opting for confrontation instead of cooperation. This necessitates Europe to become more independent of both countries. Therefore, new funding programs have been launched, especially in key technologies such as Artificial Intelligence, microelectronics, quantum technology, and biotechnology. Even if the focus is more on catching up with the USA and China rather than setting one’s own accents, the problems have at least been recognized and are now to be eliminated step by step.

Europe has many facets

This gives hope that Europe can convert its balance sheet advantage into a technological catch-up race. If this happens, it is likely to boost the European economy. In any case, the latter is worth a closer look. After all, Europe is not just “Europe”. All too often, growth in Europe is seen as synonymous with developments in the dominant economies of Germany, France, and Italy. But this falls short.

This has much to do with the construction of “Europe”. Many states, many cultures, many economies, which are not infrequently in completely different stages of economic and cyclical development. Among the countries with the strongest dynamics this year are Malta and Poland, with GDP growth of significantly over three percent compared to the previous year, respectively. Spain and Lithuania also stand out with growth of over two percent each. In this way, these nations can impress not only at the European level but also score points in a global comparison. For the USA, for example, experts see growth of “only” around two percent this year, meaning they may have less to offer than Spain and Lithuania.

And even countries that do not belong to the EU, such as Switzerland, are quite interesting. For instance, the Swiss economy grew surprisingly strongly in the second quarter of 2026, by 1.5 percent compared to the previous quarter. This gives hope for the full year.

European equities as an alternative

Despite clouded growth prospects in the heavyweights Germany, France, and Italy, a look at the European equity market could certainly be worthwhile. This can be shown exemplarily by the Euro Stoxx 50, a broadly diversified index for EU countries. For about three months, the index has been able to outperform its US competitor, the Dow Jones Industrial Average (short: Dow Jones). The Euro Stoxx 50 has seen a gain of nearly eleven percent, while the Dow Jones has seen an increase of just under nine percent (as of: 19.08.2026). This shows that European equities are currently being preferred by investors.

Furthermore, the Euro Stoxx 50 is valued significantly more attractively compared to the Dow Jones; it currently has a forward P/E ratio for the coming twelve months of 18, whereas the Dow Jones has a P/E of over 22 – and potentially higher depending on earnings estimates. The higher valuation is, of course, not entirely unfounded, as the USA is leading in many technology sectors, but the gap between “top” and “bottom” could, at least to some extent, close in favor of the European equity market.

Growing political uncertainties also support this – in November, the midterm elections are approaching in the USA, which could lead to a shift in the balance of power to the disadvantage of Donald Trump.

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