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---US outperforming Europe--- Just 3 short months back, 60% of fund managers expected European indices to outperform American ones. But despite the ongoing narrative about European stocks gaining ground on their American counterparts, the data tells a different story. The Stoxx 600, Europe's benchmark index, has underperformed the S&P 500 by 9% this year. This marks two years of lagging performance, during a time when many portfolio managers, fund managers, and investors have been bullish on rotating from American to European markets. So what’s driving this divergence between expectations and reality? A closer look at the macro reveals some key factors at play. The US economy is showing more resilience than expected, while Europe is facing headwinds. Germany, Europe's largest economy, surprisingly contracted in Q2, while the rest of the Eurozone managed just 1.2% annual growth. In contrast, America's GDP continued to outperform analyst expectations, growing at a 3.6% annual rate. Investors are also anticipating that the US Federal Reserve will cut rates sooner and more aggressively than previously thought - a positive signal for US markets. Current pricing indicates a 70% probability of a 25 basis point cut, with a 30% chance of a 50 basis point cut! It's worth noting that European stocks are still trading at a significant discount compared to their American peers. The Stoxx 600 trades at about 14 times forward earnings, while the S&P 500 sits at 21 - but this is because S&P 500 earnings forecasts are on an upward trajectory, while Stoxx 600 estimates have remained flat since June. Interestingly, investors are becoming more nuanced in their approach to the US market. The S&P 500 equal-weighted index, which reduces the impact of tech giants, has been outperforming the Nasdaq. This suggests there's value to be found beyond just the big tech names, indicating that US market growth is driven by broader fundamentals rather than just AI hype. But what’s the takeaway for investors? Global diversification still remains important, but the US market continues to defy expectations with its strong performance. Europe's lower valuations will definitely offer opportunities to savvier investors, however, American markets are still setting the pace for the rest of the world. As always, it's wise to maintain a balanced portfolio - don't put all your eggs in one basket, or one continent for that matter. #MarketAnalysis #S&P500 #Stoxx600 #GlobalMarkets #USMarkets #EuropeMarkets #FederalReserve #GDP #indices #benchmark Nasdaq S&P Global STOXX Appreciate