Value Column by Hans Peter Schupp
9 DECEMBER 2025
Stocks 2026: Europe – the quiet comeback
Hans Peter Schupp, managing partner of Fidecum AG and portfolio manager of the Contrarian Value Euroland Fund (ISIN: LU0370217092), outlines the outlook for European equities in 2026.
The past 15 years have been a triumphant march for the American stock market. Stronger economic growth, higher earnings momentum, tech euphoria, and business-friendly policies have ensured a steady inflow of capital. As a result, both stock prices and price-earnings ratios have risen significantly.
For a long time, Europe was therefore only mentioned marginally in strategy papers and investment committee meetings. Compared to the US, the old continent was considered too slow, too regulated, and not innovative enough. Who would want to invest here?
Today, Europe is unloved, underinvested, and undervalued compared to the US. The American market is trading at an average price-earnings ratio of 31, buoyed by large technology stocks. The STOXX 600 has a P/E ratio of just 18 – simply because its prices reflect significantly lower expectations. In the MSCI World Index, Europe accounts for only about 15 to 16 percent. The share of American stocks, on the other hand, is 72.5 percent – an unprecedented dominance.
Money flow: A small market with big leverage
Looking ahead to 2026 we find this starting point intriguing. After all, the exceptional position of the US has already shown some cracks over the course of the last year in light of Trump’s isolationist policy. Analysts and strategists are increasingly asking whether the valuation gap between the US and other markets, such as Europe, is still justified.
Even small changes in investment preferences could have a major impact in the future. Assuming that international investors shifted just five percentage points of their equity investments from US stocks to European securities, this would most likely have a significant impact on stock prices there. Europe’s weighting in the MSCI World Index would rise to 20 to 21 percent – an increase of more than 30 percent. So, there is no need for global enthusiasm for European companies. Even a moderate change in allocation for diversification reasons would probably be enough to trigger a visible movement in this now comparatively small European market.
Of course, this would also have to be underpinned by fundamental changes. If the outlook in the US were to cloud over somewhat, Europe could move from being a marginal issue to an obvious alternative in portfolios; not an unimaginable option.
The U.S.: Innovative power with a growing political risk
The United States will certainly remain the global engine of innovation and home to the most important tech companies next year. At the same time, however, political volatility is also increasing there: trade conflicts, tariffs, sanctions, presidential decrees, aggressive migration policy.
“America First” may support individual industries, but it also creates uncertainty about value chains, location decisions, and the supply of skilled workers. In the low-wage sector, the very workers on whom the system has relied for years are being displaced. At the same time, the supply of skilled workers is being restricted: universities are coming under increasing political pressure, and funding is being cut or canceled if a university is considered not to be toeing the party line. For foreign skilled workers, the path is being made more difficult by visas, taxes, and bureaucracy.
Added to this is a discretionary customs policy: tariffs are imposed, increased, or reduced again whenever it suits the political strategy. This is based less on economic calculations than on changing objectives—and that is precisely what makes the consequences for prices, supply chains, and locations incalculable. This is in line with the obvious interest in keeping the dollar as weak as possible: it helps the American export industry, but causes the value of international investors‘ US investments to shrink in their home currency.
Against this backdrop, the significant valuation premium that investors have long granted US stocks for their dynamism, stability, and quality appears less well-founded. Political risk and currency risk are moving from the fine print to the main text of many analyses.
Behind the image of a crisis: Europe’s underestimated resilience
Meanwhile, the situation in Europe is improving slowly but steadily. Many investors still cling to the image of “Europe being a sick man”. For decades, the continent was indeed synonymous with stagnation, crises, and reform gridlock. Beneath the surface, however, a lot has changed in recent years. Europe has weathered the financial and euro crises, the pandemic, and the energy price shock without falling apart. Unemployment in the eurozone is at historic lows, inequality and poverty rates are significantly lower than in the US, and healthcare systems are delivering more for less money. Politics is value-oriented and less erratic. And now, the German infrastructure package and massive investments in defense are also driving a surge in demand.
In a world dominated by uncertainty, that’s not a bad starting point. European companies impress with proven business models and rely less on big promises. Their earnings profiles are more manageable and comprehensible than the big growth stories in the US, and their dividend yields are higher – 3 percent compared to 1 percent. That’s not spectacular, but it can be an advantage in an environment where returns are once again being weighed more heavily against risk.
Europe 2026: A story of diversification
When a dominant market is no longer quite as extraordinary as usual and a neglected market improves somewhat, capital flows often start to shift. In 2026, there may be good reasons to believe that international investors will adjust the weightings in their portfolios: slightly less America, slightly more Europe. This flow of money could have a greater impact on the European stock market than any political speech from Brussels.
Therefore, “Europe – the quiet comeback” does not stand for negating the continent’s structural problems. It is an expression of our conviction that parts of international risk capital will in future be shifted to where valuations are lower, cash flows more predictable, and the political drama somewhat less reminiscent of operetta. This may not make for big headlines. But for long-term investors, it could be just right.
Our investment approach
For 25 years, the Contrarian Value Euroland Fund (ISIN: LU0370217092) has consistently followed the principle of investing in undervalued European companies with solid business models and long-term potential. We act like entrepreneurs who would acquire an entire company – and are prepared to go against market opinion if necessary.
About the author:
Hans Peter Schupp, managing partner of Fidecum AG and portfolio manager of the Contrarian Value Euroland Fund.
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