The Euronext NV stock exchange in the La Defense business district of Paris.
(Bloomberg) — In the ranks of the world’s 20 best-performing stock markets this year, every second index is European.
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It’s an achievement the region has managed only three times before and is a testament of revived investor confidence in Europe, where growth prospects have finally been improving. It also came as a surprise, as most strategists had predicted the year would bring meager gains while the US economy was set to fuel superior performance on Wall Street.
With a month left of trading for 2025, markets including Hungary, Slovenia and the Czech Republic have rallied more than 60% in dollar terms. That places them among the top 10 best performers globally. Spain, Poland and Austria are close behind, while Germany — one of the region’s biggest markets — has surged 20% in euros and 34% in dollar terms.
As the broader Stoxx 600 Index closes in on its biggest outperformance over the S&P 500 since 2006 in dollars, some investors say the outlook for Europe is only looking up. Inflation remains lower than in America, Germany is about to open the fiscal taps and corporate earnings are projected to rebound. The latest monthly survey by Bank of America Corp. showed investors are now net overweight European stocks, while being slightly underweight US equities.
“At the beginning of the year, people were very reluctant about the rally in Europe, and they got forced into that based on the outperformance,” said Nick Laux, head of international equity trading at Bank of America Corp., adding that there’s scope for the region to outperform further next year.
In a year rocked by President Donald Trump’s trade war, European countries that make most of their money at home such as Italy and Spain have proved to be investors’ favorites. The region’s relatively lower exposure to the artificial intelligence trade has also been a big draw at a time when there are mounting concerns about another US technology bubble.
Overall, 10 of the top 20 markets to have risen the most this year are in Europe, a feat only achieved in 2004, 2015 and 2023 in data going back to the creation of the euro area. While benchmarks in Germany and France are lower on the list at 34 and 53, respectively, they’re still well ahead of the S&P 500, which ranks 63rd in dollar terms among 92 global indexes tracked by Bloomberg.
Part of the outperformance is down to a stronger euro. The currency has rallied 12% against the greenback this year as Germany promised to spend billions on defense and infrastructure, reviving the local economy. German lawmakers are set to approve in the coming days spending €2.9 billion ($3.4 billion) on military procurement contracts, including for drones, rifles and missiles, in deals that will go largely to domestic manufacturers, Bloomberg reported on Friday.
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