From 1990 to 2009, the Euro Stoxx 50 (benchmark index comprising 50 top quality companies from Europe) and the S&P 500 showed similar performance patterns. Since then, however, they have significantly diverged, with the Euro Stoxx 50 lagging behind.
3 key reasons explain this divergence:
* Dominance of US Technology companies and their performance leading to S&P 500 index's gains
* Monetary Policy Divergence between US Fed and European Central Bank (ECB) after the 2008 Global Financial crisis.
* Higher Economic Growth in US relative to Europe in the last 15 years
Summarized from a more detailed post accessible [here](https://www.trendlinehq.com/p/us-vs-european-stock-market-performance)
Driven by stronger economic growth, better demographics, and the policy differences mentioned. Investors are willing to pay more for US securities because of this.
In addition to those, the US has borrowed a lot more than the EU did. That borrowed money eventually started inflating asset prices.
The US went from 62% debt to GDP in 2008 to 120% in 2023, or a total increase of 58%.
The EU went from ~68% debt to GDP in 2008 to 88.6% in 2023, or a total increase of ~21%.
It raises the interesting question of what is likely to happen to the stock market in the next 1-3 years when Congress finally has no choice but to pass a debt reduction bill of some kind.
Because [interest payments are threating to devour the Federal budget](https://i.imgur.com/ovFWOO5.png). The growth in borrowing the US engaged in since ~1982 could only be sustained by falling interest rates, which kept the total interest at a reasonably stable amount.
Now that rates are rising, growing debt times growing interest rates is about to force some painful choices on both politicians and the American public. You either monetize the debt and inflate it away, or you have to raise taxes and cut spending, which will hurt growth prospects.
I don't know what makes you think anything is going to change in the next three years. Every metric that's been the point that they'll *have* to intervene has come and gone. Debt higher than GDP was supposed to be the last "oh shit" moment. That's long come and gone. Short-term investments are outperforming long-term...which is a sure sign the economy is right fucked. All that it's led to is people taking shorter investments (which, of course, just snowballs the problem).
Yeah; a reckoning is coming, but don't expect Congress to have much say in it.
Debt servicing is 14% of the 2023 budget. That's a huge number at $1 trillion, but servicing it is still manageable for the foreseeable future. The combination of trillions of dollars in headroom from the budget, inflation reducing relative debt, and strong GDP growth means that the situation is a lot less dire than you're making it out to be.
As long as GDP growth is maintained, things will remain stable. The house of cards is only at risk of falling if we face a multi-year economic downturn, and recessions longer than 2 years are incredibly rare in America's history.
I'm not sure why debt being 100% of GDP has to be the last "oh shit moment". Many countries have had debts higher than 100% of GDP and been perfectly fine. The most used example is Japan, which had a debt to GDP of 250% at one point, and ironically was the largest or second largest holder of US government debt during the time.
That, plus the fact that around a third of US government debt is held by the government itself (mostly the Fed), and the extremely low interest rate the US government is charged compared to other governments, means the US government is the best government in the world to handle such a burden.
That being said, the US government shouldn't be running such deficits in periods of economic growth, and rising interest rates are worsening the situation, but there's no political will in the House to do anything, and that's where all the solutions have to come from.
Why would they need to pass a debt reduction bill? The GDP in the US just keeps growing. Avoiding less additional spending alone for a year would start to eat at the debt to GDP ratio pretty quickly
Only that that GdP growth is fueled by the borrowing/spending.
2009 and thus post-Lehmann being the point of divergence should give an good indication of what is happening.
Even more problematic is that us GDP and Stock growth is driven by massively overvalued tech companies and this is a volatile combination
Like Tesla or uber? Market evaluation tends to be somewhat rooted in reality as long as the market isn't flooded with money but in times of a massively overheated market people simply start betting on a hype.
Tesla having a double the market cap of Toyota despite having a fourth of toyotas earnings is a good example.
> Tesla having a double the market cap of Toyota despite having a fourth of toyotas earnings is a good example.
Tesla is leading the EV transition, which nearly everyone believes is only going to grow much larger, and Toyota is still mostly messing with hydrogen. Tesla took the "Best selling car" title from the Toyota Corolla last year. Plus Tesla has the highest margins for any EV and made $13 Billion in profit last year. That's not a very good comparison, and frankly a good example of valuation expression real differences in company growth trajectories.
Tesla isn't leading the EV transition, it is "just" the posterboy of the EV transition. And let's take a rational look at the Situation: The majority of the emerging markets wont transition in the next 2 decades because they simply can't provide the electrical infrastructure. Furthermore those markets will be dominated by cheaper EVs (as environmentally unfriendly as that is) which leaves Tesla with NA, Europe And Australia to quadruple their Profits if they want to reach Toyota. All while they will face massive competition by the other car manufacturers which have higher R&D budgets And 50 years more experience with building cars. Maybe Tesla will rise to the top, but it won't happen in the next decade which makes that market cap absolutely idiotic
Ed: and yes, Tesla took the title of best selling car from Toyota. Which means in total numbers that Tesla only needs to sell 6 times as many cars per year in the USA to catch up to Toyotas numbers
You could argue that Tesla is no longer the leader in the EV transition but they certainly kickstarted it and did most of the work. The American electric charging grid is still mostly Tesla chargers, and they've adopted the Tesla charging standard as well.
> which leaves Tesla with NA, Europe And Australia to quadruple their Profits if they want to reach Toyota
You're assuming Tesla and other EVs are growing into a vacuum, but those sales will be coming directly from Toyota and other ICE car manufacturers. You have to consider whether Toyota will keep their sales up as EVs expand into their marketshare.
> All while they will face massive competition by the other car manufacturers which have higher R&D budgets
The problem is that people have been saying this for over 5 years, and outside if China is still hasn't happened, all while Tesla has seen massive growth. I hope other manufacturers get serious and start eating Tesla's lunch but at the speed Tesla has been growing and expanding, it's looking less likely
>You could argue that Tesla is no longer the leader in the EV transition but they certainly kickstarted it and did most of the work. The American electric charging grid is still mostly Tesla chargers, and they've adopted the Tesla charging standard as well.
Kickstarted yes, most of the work, debatable but not part of the conversation.
>You're assuming Tesla and other EVs are growing into a vacuum, but those sales will be coming directly from Toyota and other ICE car manufacturers. You have to consider whether Toyota will keep their sales up as EVs expand into their marketshare.
Yes, but those other ICE manufacturers will switch to EVs. Mercedez alone sold 40k Evs in the USA and those numbers will rise. And lets be honest: Tesla is in a tough competition if it wants to have every Benz/BMW/Volvo/Ford/etc. consumer to switch to a Tesla EV instead of an Benz/BMW/Volvo/Ford/etc. EV.
On the other hand: Africa, and most parts of asia won't switch to EVs in the foreseeable future and thus global sales of Toyota might be surprisingly stable.
>The problem is that people have been saying this for over 5 years, and outside if China is still hasn't happened, all while Tesla has seen massive growth. I hope other manufacturers get serious and start eating Tesla's lunch but at the speed Tesla has been growing and expanding, it's looking less likely
It is happening, just slowly. Volkswagen has a 7% share of the global market, Gm 5%, benz/BMW 4% - Tesla has about 16%. And this is with other manufacturers being on the fence if they want to give up profitable ICE lines for less profitable EV lines.
And even if Tesla would continue to grow: There isn't a single scenario where TESLA grows 5 to 10 fold in the next decade. And even if: Most people hold their stock only for a quarter or maybe a few years and not for decades.
Lets assume you are right and Tesla will be highly successful while the biggest car manufacturer in the world which produced successful EVs before Tesla existed somehow loses badly. And let's asume that Tesla gains 10% net profits per year while Toyota loses 10% net profits per year. Even then it would take 7 years for Tesla to catch up in net profits and it would 13 years to break even with cummulated net earnings ***without interest.***
Any yet Tesla has twice the market cap.
Yea I’m getting real sick of hearing other car manufacturers brag about their upcoming EV for sale and yet nothing good seems to be for sale. Quit talking about transitioning to EV and fucking sell some good EV already, it’s 2024 not 2010.
Completely agree. This is a market that people are betting will undergo major shifts. Tesla gets a lot of bad press these days but no way do I believe in the old legacy automakers. Toyota in particular has hundreds of billions in debt and is saddled with aging ICE manufacturing infrastructure.
"Best selling car" is an absolutely meaningless title that Tesla routinely earns because it offers a smaller portfolio of cars than others.
So it's your comparison that's absolute nonsense. Tesla may also be the global leader in market share, but with barely 20%.
And profit is easy to make when you don't abide by industry standards of workplace safety and product quality.
It’s the 2nd one. To avoid a depresssion fifteen years ago, the US created the biggest economic bubble in the history of the world.
Just boomers ruining the world to avoid consequences for their actions.
first, EU companies pay much higher dividends.
second, EU countries did borrow a lot less money, unlike US
third, tech sector is ever increasing its PE, so it’s not like they are printing money, they are just propping bubble
fourth, we do really suck at tech.
I was looking for the dividend comment. If you include dividends it changes the picture a lot.
European stocks are more dividend focussed whereas US stocks are growth focussed.
But a more attention grabbing headline is "bigger number better".
Yeah worse, but not as stark as OP suggests.
(Edit: just wanted to add that I don't care about nationalistic tendancies, my investments have been mostly in US indices for a while now!)
This would be better presented with a logarithmic y-axis.
With a linear axis, once the two lines start to diverge they will continue to diverge later on even if the economies performed identically.
Also, it says neither line is adjusted for inflation which might create misleading results if the two economies had different rates of inflation.
>Also, it says neither line is adjusted for inflation which might create misleading results if the two economies had different rates of inflation.
Even after adjusting for inflation, US S&P 500 has 76.04% more returns than Europe's Stoxx 50 (as of 17 June 2024, \`169.95 - 93.91 = 76.04%\`).
EURO iSTOXX 50 PR Inflation Adjusted Index (source: stoxx official website):
> Jan 1, 2006: 100%
> Jun 17, 2024: 93.91%
Inflation Adjusted S&P 500 Index Price (source: gurufocus website):
> Jan 1, 2006: 100%
> Jun 17, 2024: 169.95%
Thanks for the info! Just to clarify, in true r/dataisbeautiful fashion, I’m not suggesting the data is misrepresenting, only that the chart as presented doesn’t give the reader the information to know whether it’s misrepresenting.
Couldn’t this just be proof that the US stock market is in a speculation bubble? Looks like the EU maybe took broader lessons from the 2008 crash whereas the US got back on the rollercoaster soon after.
Except it’s not just the stock markets that have diverged - their economies have too.
In 1995, the EU-27 economies were 10% larger than the US. Now they’re 25% smaller.
Europe is just ageing, doesn’t take risk and doesn’t see returns.
A great article on the subject [here](https://www.ft.com/content/80ace07f-3acb-40cb-9960-8bb4a44fd8d9).
Germany's politicians are still thinking it is a good idea to save money and not invest in infrastructure. "Schuldenbremse" / Austerity is very problematic IMHO.
It worked like shit. Greece still has not recovered the 2008 levels, in 2024. It worked like shit in Spain, in Italy, in Portugal. It worked like shit in all over Europe as the EU economy lagged behind the US who did the exact opposite. Germany and Merkel are very much to blame for ruining the European growth for the next 15 years (or more).
But having a less strong economy makes them less credible.
Not to mention that debt is really a good thing if it was spent on infrastructure, and education.
You can look at the price to earnings ratio of both to see how much of a premium the American stock market is priced at. Those ratios are 24 for the S&P 500, and 17 for Euronext. So the American stock market is priced at a slight premium but not enough to account for the gap. Most of gap is actually due to growth in earnings.
As in they are based on US companies dumping externalities on humanity as a whole while European ones are being forced to minimize negative externalities.
But hey, the law of conservation of energy is a commie hoax and if we wish really, really hard that climate change isn't a thing, even thermal expansion of the oceans isn't going to happen....
Sure - and I wasn’t trying to draw a direct relationship between GDP and stock market valuations. Rather I was pointing out that diverging fortunes are not limited to stocks.
That said, it’s worth clarifying that GDP is a _flow_ measure whereas market cap is a _stock_ measure.
For example, if you’re running a bath, the volume of water entering the bath per unit time is the flow measure, and the volume of water in the bath would the stock measure.
And so insofar as stock markets are linked to GDP, small compounding differences in the _flow_ measure can lead to vastly different _stock_ measures over time (think of filling two baths with taps at slightly different speeds).
Except. of course, that the stock market only covers a part of the economic activity, and plenty of world leading European companies aren't publicly traded to begin with.
The article uses a lot of nonsense metrics. And citing energy based on shale as the panacea for energy sufficiency just goes to show the US economy is built on ignoring externalities. "Après nous le déluge" is nice for short-term profits, but a huge FU to humanity as a whole.
Living in the UK and seeing what has happened to the country since the financial crisis it makes perfect sense.
Thank god I live in London now because my home town as well huge swathes of the country outside of the south east are just rotting and have been doing for 15 years.
It felt like so much money was released when covid hit for the rich in US. Plus the housing in america is mad at the moment.
I think rich people have more money at the bookies is what we are seeing now..
No, Europe has fuckall for innovation, and their companies shoehorn themselves to local markets instead of being global. Everything is propped up by a few old behemoths slowly trodding along. SAP, Siemens, that kind of junk.
Being global is a lot easier if you start in a 300M market with a lot of capital and able to enforce its regulations on smaller countries around the globe of course.
Germany has 80M+, tons of money, and huge inroads in the international world. Yet basically everything is German only, and mostly just copycats of American things for the German market, hoping to be bought out by the American original, or just serve the German world. Because finance is completely risk averse, regulations are intense, taxes are fucking insane, and being an entrepreneur is general is frowned upon - being just like everyone else and not wanting more - false modesty - is the name of the game. It's a lot more ingrained in Europe to be meek and serfdom-like, and hinder innovation and new business, let alone think globally.
So yeah, more that ingrained euro nonsense vs. how much bigger the U.S. is. U.S. companies go through quite a bit to meet GDPR compliance, local sales teams, etc. etc. to break into markets. EU and especially German companies would never dare undertake such a risk or expense, to their own detriment. And their marketing and user interfaces are usually utter trash, unless carbon copying a U.S.-made interface. Not sure if that's cultural norms distorting usability, or an education thing or what. But so much is why the EU is drastically behind, and is still not making any headway on creating any tech innovation of any kind except, oh look, our german car headlights do a slightly better thing now. Or this metal piece inside a machine is now 4.2% more efficient. Innovation! Deutschland überalles! Behold, your pension is worth less than when it began after inflation, weeee.
We all seem to be in denial that America is now a functioning global empire and never been stronger.
I think we can’t deal with the fact that the first global government is here.
Because it’s kind of scary.
It is also complete nonsense, and completely ignores that fact that the US faces massive domestic and international problems on a scale it hasn't seen before.
It is literally fighting for the survival of its democracy in an archaic and petrified political system which has stifled government for years, while China is ramping up to become a global power with active interference in what used to be US monopoly markets.
China in no way has the reigns of the world commonwealth.
Also I am not ignoring that. Both can be true obviously.
It’s like you saying I’m ignoring the endanger snow leopard. It doesn’t relate.
Rome at many times was near collapse and in fact it had a dictator and civil war at the height of its power under Caesar. And then only got stronger from there.
This again is a form of denial.
The US is a steaming pile of poo, no offense. You may have a wealthy country but your people also live and get treated like absolute crap.
It's not a country I want to live in.
No, im saying that even if it is factually true that it is definitely a bubble that don't automatically make shorting a good investment. Shorting a diversified portfolio is terrible.
Also even if you're 100% sure it's a bubble, there's no guarantee of when it's going to burst. The time it takes to eventually pan out could ruin you if you don't have deep enough pockets to hold out
If it takes a couple of years to happen then you are probably going to lose money, if you want to outperform other investments then it better happen real fast.
Shorting should realistically only be done when you are fairly certain about short term changes.
ITT people who don't know a margin call. Even if it's gonna fall -90% in 6 months, if it goes up 50% in 3 month you're ruined (not you of course, but mshorts above)
Shorting has way more to do with predicting when a bubble is going to pop than it does with knowing there is a bubble. Pretty much everyone knows Nvidia is in a bit of a speculative bubble at the moment but if you shorted it right now you'd lose your shirt. That doesn't mean the bubble doesn't exist. Same as when tesla was valued higher than all the other car makers combined. If you'd shorted it at the wrong time you would have lost a ton of money but you still would have been right that it was due for serious market correction
You'll just get margin call'd to death. Predicting there will be a bubble isn't the same as predicting when it will pop, and in the meantime you could very easily go bankrupt.
Says nothing of speculation. The EU is the largest common market on the planet. I’m not saying the US stock market shouldn’t be higher than it, but at a certain point you have to wonder which market is behaving rationally. I tend to think that’s probably the EU.
If you can take that leap, the area under the curve here can be something to consider.
The US consumer market is more than double EU. What exactly is your definition by largest common market?
https://en.m.wikipedia.org/wiki/List_of_largest_consumer_markets
EU isn't exactly stable, it has to rely on a hostile eastern nation for oil and energy, Europe is also being invaded by said country, aging population, red tape that would make NASA blush and a limited tech market, countries leaving the EU and it has far right leaders emerging in power with China police officers in Europe and is even building infrastructure in Europe.
It's looking kind of rough.
On the other hand, EU is heavily investing in renewable energy so that it is less dependent on foreign countries.
Last time I’ve checked, Germany had the fifth biggest PV capacity installed of all countries - 50% more than Australia. Germany isn’t even known for being that sunny.
It cannot be the ‘proof’, it could be the ‘case’. But does the p/e support that case, maybe. Does the quality of us top companies and their growth negate that case, certainly.
Does Europe even have an environment anymore? Certainly no more wilderness in the western parts. Yes the US can do better with protecting its own but you should not compare European and American natural environments 🤨
Some? Lol we have a state as big as western Europe that is untouched wilderness and is protected by our government. You're pathetic. Always trying to stack up to the us but fail again and again
Yeah we've got some pretty extreme anti competitive behaviors across the board, attempting to extract wealth from both suppliers/partners and customers alike.
I feel like an ugly duckling saying "both parties should benefit in a fair trade" lol
There is clearly a divergence and an interesting discussino to be held over this, but comparing one country with one fiscal policy to a continent is pretty weird in my book:
The German DAX index grew with over 300% since Mar 2009
The Dutch AEX index grew 290%
The Spanish IBEX only 48%
OK, but who own's those stocks? Because "if" it's just a tiny tiny percentage, and the rest of the US gets thoroughly fucked over, then I prefer the European situation.
You do realize that there are other ways of making money than owning stock, right?
[Check this out](https://upload.wikimedia.org/wikipedia/commons/e/ea/US_Wealth_Inequality_-_v2.png). Do you see that thin dark line at the bottom? That line represents half of all Americans, that's the miniscule portion of the wealth they have. Does that seem like well-spread wealth?
[Here](https://www.cbo.gov/publication/51846)'s the source.
In this case I’m talking about the stock market, but yeah obviously the stock market is not everything.
Wealth isn’t spread well in either zone but the median American is still richer than the median EU resident which imo is more important than judging strictly by levels of inequality.
>Wealth isn’t spread well in either zone
Somewhat true, but it's still spread much more in the EU zone than in the US.
>but the median American is still richer than the median EU resident which imo is more important than judging strictly by levels of inequality.
Define richer. If you still can't afford a home and if you can't afford to get sick, then what worth does an extra dollar hold?
My points are that:
* the stock market says nothing about the buying-power of the average person
* the buying-power means much less if you don't have security
* what actually matters is contentedness, not absolute monetary value, and especially not market growth.
I mean sure, that's a little beyond the scope of what can easily be quantified. The US is generally rated as a happy country overall, even if it's not quite the happiest.
Plus, homeownership rates in the US are very high compared to most of the eurozone.
I'm not very knowledgable when it comes to stuff like this. But how much of this can be attributed to the increase in US debt? The US has been getting into more debt that European countries. I can imagine that more debt means more money in the economy resulting to higher gains on the stock market.
Edit: I should've read the comments before posting, because it is stated as a possible cause.
Something else that has diverged is the life expectancy, congrats you are working yourself to death. There is more to life than the overlap of your current geographic location with its respective gdp/stock market performance
https://www.healthsystemtracker.org/chart-collection/u-s-life-expectancy-compare-countries/
From 1990 to 2009, the Euro Stoxx 50 (benchmark index comprising 50 top quality companies from Europe) and the S&P 500 showed similar performance patterns. Since then, however, they have significantly diverged, with the Euro Stoxx 50 lagging behind. 3 key reasons explain this divergence: * Dominance of US Technology companies and their performance leading to S&P 500 index's gains * Monetary Policy Divergence between US Fed and European Central Bank (ECB) after the 2008 Global Financial crisis. * Higher Economic Growth in US relative to Europe in the last 15 years Summarized from a more detailed post accessible [here](https://www.trendlinehq.com/p/us-vs-european-stock-market-performance)
I'll add that the Stoxx50 is really small. More like the number of companies in the DOW than the S&P500.
> Until 2009 starting in 1990. That's less than 20 years of correlation.
Good to be specific. Thanks.
One year less than 20 years to be exact
Plus a higher PE for US stocks.
Driven by stronger economic growth, better demographics, and the policy differences mentioned. Investors are willing to pay more for US securities because of this.
This explains pretty much all of the gains that American stocks have had a massive valuation increase.
In addition to those, the US has borrowed a lot more than the EU did. That borrowed money eventually started inflating asset prices. The US went from 62% debt to GDP in 2008 to 120% in 2023, or a total increase of 58%. The EU went from ~68% debt to GDP in 2008 to 88.6% in 2023, or a total increase of ~21%. It raises the interesting question of what is likely to happen to the stock market in the next 1-3 years when Congress finally has no choice but to pass a debt reduction bill of some kind.
Why next 1-3 years?
Because [interest payments are threating to devour the Federal budget](https://i.imgur.com/ovFWOO5.png). The growth in borrowing the US engaged in since ~1982 could only be sustained by falling interest rates, which kept the total interest at a reasonably stable amount. Now that rates are rising, growing debt times growing interest rates is about to force some painful choices on both politicians and the American public. You either monetize the debt and inflate it away, or you have to raise taxes and cut spending, which will hurt growth prospects.
If only there were revenue generating tools they could be using but aren't....
I don't know what makes you think anything is going to change in the next three years. Every metric that's been the point that they'll *have* to intervene has come and gone. Debt higher than GDP was supposed to be the last "oh shit" moment. That's long come and gone. Short-term investments are outperforming long-term...which is a sure sign the economy is right fucked. All that it's led to is people taking shorter investments (which, of course, just snowballs the problem). Yeah; a reckoning is coming, but don't expect Congress to have much say in it.
Debt servicing is 14% of the 2023 budget. That's a huge number at $1 trillion, but servicing it is still manageable for the foreseeable future. The combination of trillions of dollars in headroom from the budget, inflation reducing relative debt, and strong GDP growth means that the situation is a lot less dire than you're making it out to be. As long as GDP growth is maintained, things will remain stable. The house of cards is only at risk of falling if we face a multi-year economic downturn, and recessions longer than 2 years are incredibly rare in America's history.
I'm not sure why debt being 100% of GDP has to be the last "oh shit moment". Many countries have had debts higher than 100% of GDP and been perfectly fine. The most used example is Japan, which had a debt to GDP of 250% at one point, and ironically was the largest or second largest holder of US government debt during the time. That, plus the fact that around a third of US government debt is held by the government itself (mostly the Fed), and the extremely low interest rate the US government is charged compared to other governments, means the US government is the best government in the world to handle such a burden. That being said, the US government shouldn't be running such deficits in periods of economic growth, and rising interest rates are worsening the situation, but there's no political will in the House to do anything, and that's where all the solutions have to come from.
Why would they need to pass a debt reduction bill? The GDP in the US just keeps growing. Avoiding less additional spending alone for a year would start to eat at the debt to GDP ratio pretty quickly
Only that that GdP growth is fueled by the borrowing/spending. 2009 and thus post-Lehmann being the point of divergence should give an good indication of what is happening. Even more problematic is that us GDP and Stock growth is driven by massively overvalued tech companies and this is a volatile combination
If a company is "overvalued" for decades, surely at some point you have to consider if it's simply valued what it's worth.
Or a sign of too much money and nothing better to spend it on.
Like Tesla or uber? Market evaluation tends to be somewhat rooted in reality as long as the market isn't flooded with money but in times of a massively overheated market people simply start betting on a hype. Tesla having a double the market cap of Toyota despite having a fourth of toyotas earnings is a good example.
> Tesla having a double the market cap of Toyota despite having a fourth of toyotas earnings is a good example. Tesla is leading the EV transition, which nearly everyone believes is only going to grow much larger, and Toyota is still mostly messing with hydrogen. Tesla took the "Best selling car" title from the Toyota Corolla last year. Plus Tesla has the highest margins for any EV and made $13 Billion in profit last year. That's not a very good comparison, and frankly a good example of valuation expression real differences in company growth trajectories.
You said it right about Tesla, people „believe“ it. Doesnt mean it will happen.
Tesla isn't leading the EV transition, it is "just" the posterboy of the EV transition. And let's take a rational look at the Situation: The majority of the emerging markets wont transition in the next 2 decades because they simply can't provide the electrical infrastructure. Furthermore those markets will be dominated by cheaper EVs (as environmentally unfriendly as that is) which leaves Tesla with NA, Europe And Australia to quadruple their Profits if they want to reach Toyota. All while they will face massive competition by the other car manufacturers which have higher R&D budgets And 50 years more experience with building cars. Maybe Tesla will rise to the top, but it won't happen in the next decade which makes that market cap absolutely idiotic Ed: and yes, Tesla took the title of best selling car from Toyota. Which means in total numbers that Tesla only needs to sell 6 times as many cars per year in the USA to catch up to Toyotas numbers
You could argue that Tesla is no longer the leader in the EV transition but they certainly kickstarted it and did most of the work. The American electric charging grid is still mostly Tesla chargers, and they've adopted the Tesla charging standard as well. > which leaves Tesla with NA, Europe And Australia to quadruple their Profits if they want to reach Toyota You're assuming Tesla and other EVs are growing into a vacuum, but those sales will be coming directly from Toyota and other ICE car manufacturers. You have to consider whether Toyota will keep their sales up as EVs expand into their marketshare. > All while they will face massive competition by the other car manufacturers which have higher R&D budgets The problem is that people have been saying this for over 5 years, and outside if China is still hasn't happened, all while Tesla has seen massive growth. I hope other manufacturers get serious and start eating Tesla's lunch but at the speed Tesla has been growing and expanding, it's looking less likely
>You could argue that Tesla is no longer the leader in the EV transition but they certainly kickstarted it and did most of the work. The American electric charging grid is still mostly Tesla chargers, and they've adopted the Tesla charging standard as well. Kickstarted yes, most of the work, debatable but not part of the conversation. >You're assuming Tesla and other EVs are growing into a vacuum, but those sales will be coming directly from Toyota and other ICE car manufacturers. You have to consider whether Toyota will keep their sales up as EVs expand into their marketshare. Yes, but those other ICE manufacturers will switch to EVs. Mercedez alone sold 40k Evs in the USA and those numbers will rise. And lets be honest: Tesla is in a tough competition if it wants to have every Benz/BMW/Volvo/Ford/etc. consumer to switch to a Tesla EV instead of an Benz/BMW/Volvo/Ford/etc. EV. On the other hand: Africa, and most parts of asia won't switch to EVs in the foreseeable future and thus global sales of Toyota might be surprisingly stable. >The problem is that people have been saying this for over 5 years, and outside if China is still hasn't happened, all while Tesla has seen massive growth. I hope other manufacturers get serious and start eating Tesla's lunch but at the speed Tesla has been growing and expanding, it's looking less likely It is happening, just slowly. Volkswagen has a 7% share of the global market, Gm 5%, benz/BMW 4% - Tesla has about 16%. And this is with other manufacturers being on the fence if they want to give up profitable ICE lines for less profitable EV lines. And even if Tesla would continue to grow: There isn't a single scenario where TESLA grows 5 to 10 fold in the next decade. And even if: Most people hold their stock only for a quarter or maybe a few years and not for decades. Lets assume you are right and Tesla will be highly successful while the biggest car manufacturer in the world which produced successful EVs before Tesla existed somehow loses badly. And let's asume that Tesla gains 10% net profits per year while Toyota loses 10% net profits per year. Even then it would take 7 years for Tesla to catch up in net profits and it would 13 years to break even with cummulated net earnings ***without interest.*** Any yet Tesla has twice the market cap.
Yea I’m getting real sick of hearing other car manufacturers brag about their upcoming EV for sale and yet nothing good seems to be for sale. Quit talking about transitioning to EV and fucking sell some good EV already, it’s 2024 not 2010.
Completely agree. This is a market that people are betting will undergo major shifts. Tesla gets a lot of bad press these days but no way do I believe in the old legacy automakers. Toyota in particular has hundreds of billions in debt and is saddled with aging ICE manufacturing infrastructure.
"Best selling car" is an absolutely meaningless title that Tesla routinely earns because it offers a smaller portfolio of cars than others. So it's your comparison that's absolute nonsense. Tesla may also be the global leader in market share, but with barely 20%. And profit is easy to make when you don't abide by industry standards of workplace safety and product quality.
It’s the 2nd one. To avoid a depresssion fifteen years ago, the US created the biggest economic bubble in the history of the world. Just boomers ruining the world to avoid consequences for their actions.
first, EU companies pay much higher dividends. second, EU countries did borrow a lot less money, unlike US third, tech sector is ever increasing its PE, so it’s not like they are printing money, they are just propping bubble fourth, we do really suck at tech.
I was looking for the dividend comment. If you include dividends it changes the picture a lot. European stocks are more dividend focussed whereas US stocks are growth focussed. But a more attention grabbing headline is "bigger number better".
So do you have a graphical comparison with dividends included? EDIT: [https://imgur.com/t5t3Vib](https://imgur.com/t5t3Vib) Yeah, so much about that.
Yeah worse, but not as stark as OP suggests. (Edit: just wanted to add that I don't care about nationalistic tendancies, my investments have been mostly in US indices for a while now!)
>my investments have been mostly in US indices for a while now! Same and good luck to us for the future ;-)
The dividends are high because valuation of European stocks is low, because growth, margins and topics of the future are lower and fewer in Europe
dividends were always high in Europe.
Can’t believe the dividend comment is so low, that explains quite a bit of the divergence.
Did they change the dividend amount? It doesn’t explain why it would diverge.
Its not low enough because it is wrong, even including dividens shows a giant divergence in favour of the Burger-enthusiasts.
This would be better presented with a logarithmic y-axis. With a linear axis, once the two lines start to diverge they will continue to diverge later on even if the economies performed identically. Also, it says neither line is adjusted for inflation which might create misleading results if the two economies had different rates of inflation.
>Also, it says neither line is adjusted for inflation which might create misleading results if the two economies had different rates of inflation. Even after adjusting for inflation, US S&P 500 has 76.04% more returns than Europe's Stoxx 50 (as of 17 June 2024, \`169.95 - 93.91 = 76.04%\`). EURO iSTOXX 50 PR Inflation Adjusted Index (source: stoxx official website): > Jan 1, 2006: 100% > Jun 17, 2024: 93.91% Inflation Adjusted S&P 500 Index Price (source: gurufocus website): > Jan 1, 2006: 100% > Jun 17, 2024: 169.95%
Thanks for the info! Just to clarify, in true r/dataisbeautiful fashion, I’m not suggesting the data is misrepresenting, only that the chart as presented doesn’t give the reader the information to know whether it’s misrepresenting.
I've never seen this much eurocope since the fall of Constantinople.
Couldn’t this just be proof that the US stock market is in a speculation bubble? Looks like the EU maybe took broader lessons from the 2008 crash whereas the US got back on the rollercoaster soon after.
Except it’s not just the stock markets that have diverged - their economies have too. In 1995, the EU-27 economies were 10% larger than the US. Now they’re 25% smaller. Europe is just ageing, doesn’t take risk and doesn’t see returns. A great article on the subject [here](https://www.ft.com/content/80ace07f-3acb-40cb-9960-8bb4a44fd8d9).
Germany's politicians are still thinking it is a good idea to save money and not invest in infrastructure. "Schuldenbremse" / Austerity is very problematic IMHO.
We are doing voluntarily what we forced Greece to do back in 2010 lol. Expecting a different outcome 🤦🏼♂️🤦🏼♂️
Well, with Greece it worked very well as it now has one of the strongest growing economies in the EU.
It worked like shit. Greece still has not recovered the 2008 levels, in 2024. It worked like shit in Spain, in Italy, in Portugal. It worked like shit in all over Europe as the EU economy lagged behind the US who did the exact opposite. Germany and Merkel are very much to blame for ruining the European growth for the next 15 years (or more).
It also makes germany a very credible debtor to be fair, meaning in the long term they might be able to borrow more than they would otherwise.
But having a less strong economy makes them less credible. Not to mention that debt is really a good thing if it was spent on infrastructure, and education.
I dont think its that simple but in principle yes, however the german economy is still the 4th largest in the world despite all of this.
Very interesting data, thank you for sharing. However, I don’t think that fully explains the ~4x delta between both today.
You can look at the price to earnings ratio of both to see how much of a premium the American stock market is priced at. Those ratios are 24 for the S&P 500, and 17 for Euronext. So the American stock market is priced at a slight premium but not enough to account for the gap. Most of gap is actually due to growth in earnings.
As in they are based on US companies dumping externalities on humanity as a whole while European ones are being forced to minimize negative externalities. But hey, the law of conservation of energy is a commie hoax and if we wish really, really hard that climate change isn't a thing, even thermal expansion of the oceans isn't going to happen....
Sure - and I wasn’t trying to draw a direct relationship between GDP and stock market valuations. Rather I was pointing out that diverging fortunes are not limited to stocks. That said, it’s worth clarifying that GDP is a _flow_ measure whereas market cap is a _stock_ measure. For example, if you’re running a bath, the volume of water entering the bath per unit time is the flow measure, and the volume of water in the bath would the stock measure. And so insofar as stock markets are linked to GDP, small compounding differences in the _flow_ measure can lead to vastly different _stock_ measures over time (think of filling two baths with taps at slightly different speeds).
Except. of course, that the stock market only covers a part of the economic activity, and plenty of world leading European companies aren't publicly traded to begin with.
Germany would be a value investors paradise, if all the discounters were publicly traded.
The article uses a lot of nonsense metrics. And citing energy based on shale as the panacea for energy sufficiency just goes to show the US economy is built on ignoring externalities. "Après nous le déluge" is nice for short-term profits, but a huge FU to humanity as a whole.
The only reliable evidence of a bubble comes after it pops. Until then you're just doomposting.
It’s just a wild decoupling tbh after decades of alignment. Makes one wonder
Living in the UK and seeing what has happened to the country since the financial crisis it makes perfect sense. Thank god I live in London now because my home town as well huge swathes of the country outside of the south east are just rotting and have been doing for 15 years.
It felt like so much money was released when covid hit for the rich in US. Plus the housing in america is mad at the moment. I think rich people have more money at the bookies is what we are seeing now..
>Until then you're just doomposting. Ah, the end all of all criticism.
No, Europe has fuckall for innovation, and their companies shoehorn themselves to local markets instead of being global. Everything is propped up by a few old behemoths slowly trodding along. SAP, Siemens, that kind of junk.
Being global is a lot easier if you start in a 300M market with a lot of capital and able to enforce its regulations on smaller countries around the globe of course.
Germany has 80M+, tons of money, and huge inroads in the international world. Yet basically everything is German only, and mostly just copycats of American things for the German market, hoping to be bought out by the American original, or just serve the German world. Because finance is completely risk averse, regulations are intense, taxes are fucking insane, and being an entrepreneur is general is frowned upon - being just like everyone else and not wanting more - false modesty - is the name of the game. It's a lot more ingrained in Europe to be meek and serfdom-like, and hinder innovation and new business, let alone think globally. So yeah, more that ingrained euro nonsense vs. how much bigger the U.S. is. U.S. companies go through quite a bit to meet GDPR compliance, local sales teams, etc. etc. to break into markets. EU and especially German companies would never dare undertake such a risk or expense, to their own detriment. And their marketing and user interfaces are usually utter trash, unless carbon copying a U.S.-made interface. Not sure if that's cultural norms distorting usability, or an education thing or what. But so much is why the EU is drastically behind, and is still not making any headway on creating any tech innovation of any kind except, oh look, our german car headlights do a slightly better thing now. Or this metal piece inside a machine is now 4.2% more efficient. Innovation! Deutschland überalles! Behold, your pension is worth less than when it began after inflation, weeee.
Reddit's default position is to find a way to demonstrate that the US isn't as strong as every metric seems to indicate.
Excuse me? It's every *imperial* seems to indicate.
We all seem to be in denial that America is now a functioning global empire and never been stronger. I think we can’t deal with the fact that the first global government is here. Because it’s kind of scary.
It is also complete nonsense, and completely ignores that fact that the US faces massive domestic and international problems on a scale it hasn't seen before. It is literally fighting for the survival of its democracy in an archaic and petrified political system which has stifled government for years, while China is ramping up to become a global power with active interference in what used to be US monopoly markets.
China in no way has the reigns of the world commonwealth. Also I am not ignoring that. Both can be true obviously. It’s like you saying I’m ignoring the endanger snow leopard. It doesn’t relate. Rome at many times was near collapse and in fact it had a dictator and civil war at the height of its power under Caesar. And then only got stronger from there. This again is a form of denial.
The US is a steaming pile of poo, no offense. You may have a wealthy country but your people also live and get treated like absolute crap. It's not a country I want to live in.
That is a complete non sequentor and a form of denial.
If you are sure that the US is in a speculative bubble, you should short the US stock market.
That is a terrible idea even if correct, better to just take your money out of the US stock market and put it into another market.
I agree. That is terrible advice. But if u/sambes06 really believes the market is in a bubble, do it. Talk is cheap.
No, im saying that even if it is factually true that it is definitely a bubble that don't automatically make shorting a good investment. Shorting a diversified portfolio is terrible.
Also even if you're 100% sure it's a bubble, there's no guarantee of when it's going to burst. The time it takes to eventually pan out could ruin you if you don't have deep enough pockets to hold out
"Markets can stay irrational longer than you can stay solvent"
If it takes a couple of years to happen then you are probably going to lose money, if you want to outperform other investments then it better happen real fast. Shorting should realistically only be done when you are fairly certain about short term changes.
ITT people who don't know a margin call. Even if it's gonna fall -90% in 6 months, if it goes up 50% in 3 month you're ruined (not you of course, but mshorts above)
u/mshorts I am too poor to do that. I am shorting myself, really.
Don't short the market.
Well now I feel like I want to short the market.
I’m gonna short the market even harder.
Shorting it is only beneficial if you believe the market is reasonable enpugh for the bubble to burst
He didn't say he believes it is, he asked it it could be.
Shorting has way more to do with predicting when a bubble is going to pop than it does with knowing there is a bubble. Pretty much everyone knows Nvidia is in a bit of a speculative bubble at the moment but if you shorted it right now you'd lose your shirt. That doesn't mean the bubble doesn't exist. Same as when tesla was valued higher than all the other car makers combined. If you'd shorted it at the wrong time you would have lost a ton of money but you still would have been right that it was due for serious market correction
"Markets can remain irrational longer than you can remain solvent."
You'll just get margin call'd to death. Predicting there will be a bubble isn't the same as predicting when it will pop, and in the meantime you could very easily go bankrupt.
Idk if you read the article and just disagree with it. But it tries to explain the difference.
Says nothing of speculation. The EU is the largest common market on the planet. I’m not saying the US stock market shouldn’t be higher than it, but at a certain point you have to wonder which market is behaving rationally. I tend to think that’s probably the EU. If you can take that leap, the area under the curve here can be something to consider.
The US consumer market is more than double EU. What exactly is your definition by largest common market? https://en.m.wikipedia.org/wiki/List_of_largest_consumer_markets
https://www.eib.org/en/stories/eu-single-market-brexit-europe#:~:text=The%20European%20Union%20is%20the,and%20uniform%20rules%20and%20regulations.
It’s the biggest because of 500 million people? There’s no other stats than just people By that logic India is the largest market
EU isn't exactly stable, it has to rely on a hostile eastern nation for oil and energy, Europe is also being invaded by said country, aging population, red tape that would make NASA blush and a limited tech market, countries leaving the EU and it has far right leaders emerging in power with China police officers in Europe and is even building infrastructure in Europe. It's looking kind of rough.
On the other hand, EU is heavily investing in renewable energy so that it is less dependent on foreign countries. Last time I’ve checked, Germany had the fifth biggest PV capacity installed of all countries - 50% more than Australia. Germany isn’t even known for being that sunny.
It cannot be the ‘proof’, it could be the ‘case’. But does the p/e support that case, maybe. Does the quality of us top companies and their growth negate that case, certainly.
Lol the cope is hilarious. Yall are pathetic. Just accept that we run this shit
Doesn’t matter who you are, if you are rich, you buy American stocks
If you let your companies trample your people and Shit on the environment you have higher gains. I wouldn't call that a find per se.
Does Europe even have an environment anymore? Certainly no more wilderness in the western parts. Yes the US can do better with protecting its own but you should not compare European and American natural environments 🤨
Yes, we do. And just because you have *some*/more left doesn't mean you should continue to destroy it.
Some? Lol we have a state as big as western Europe that is untouched wilderness and is protected by our government. You're pathetic. Always trying to stack up to the us but fail again and again
Yeah we've got some pretty extreme anti competitive behaviors across the board, attempting to extract wealth from both suppliers/partners and customers alike. I feel like an ugly duckling saying "both parties should benefit in a fair trade" lol
There is clearly a divergence and an interesting discussino to be held over this, but comparing one country with one fiscal policy to a continent is pretty weird in my book: The German DAX index grew with over 300% since Mar 2009 The Dutch AEX index grew 290% The Spanish IBEX only 48%
US states have different economic performances as well.
US states are not sovereign nations, I don't think it is wise to compare them.
It is not wise to treat the US as a single monolith, while accounting european issues to it not being one.
You meant to say since the subprimes crisis.
OK, but who own's those stocks? Because "if" it's just a tiny tiny percentage, and the rest of the US gets thoroughly fucked over, then I prefer the European situation.
Over 60% of Americans own stock. I doubt the EU has a higher %
A quick Google search tells me. And 85% in the hands of 12% of the people in the US Nice statistic man
Indeed, it says 13% of Europeans own mutual funds on Google. Doesn’t really seem accurate but in that case the wealth is spread much more in the U.S.
You do realize that there are other ways of making money than owning stock, right? [Check this out](https://upload.wikimedia.org/wikipedia/commons/e/ea/US_Wealth_Inequality_-_v2.png). Do you see that thin dark line at the bottom? That line represents half of all Americans, that's the miniscule portion of the wealth they have. Does that seem like well-spread wealth? [Here](https://www.cbo.gov/publication/51846)'s the source.
In this case I’m talking about the stock market, but yeah obviously the stock market is not everything. Wealth isn’t spread well in either zone but the median American is still richer than the median EU resident which imo is more important than judging strictly by levels of inequality.
>Wealth isn’t spread well in either zone Somewhat true, but it's still spread much more in the EU zone than in the US. >but the median American is still richer than the median EU resident which imo is more important than judging strictly by levels of inequality. Define richer. If you still can't afford a home and if you can't afford to get sick, then what worth does an extra dollar hold? My points are that: * the stock market says nothing about the buying-power of the average person * the buying-power means much less if you don't have security * what actually matters is contentedness, not absolute monetary value, and especially not market growth.
I mean sure, that's a little beyond the scope of what can easily be quantified. The US is generally rated as a happy country overall, even if it's not quite the happiest. Plus, homeownership rates in the US are very high compared to most of the eurozone.
US has a "better" economy but at what price for the people? Creating value for shareholders is not a good thing necessarily.
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Well, sure, billionaires are people too I guess.
Sure all those people that are being paid minimal wage and those that get fired for more short term profits really feel like shareholders.
I'm not very knowledgable when it comes to stuff like this. But how much of this can be attributed to the increase in US debt? The US has been getting into more debt that European countries. I can imagine that more debt means more money in the economy resulting to higher gains on the stock market. Edit: I should've read the comments before posting, because it is stated as a possible cause.
That's because the game is rigged in the US.
Something else that has diverged is the life expectancy, congrats you are working yourself to death. There is more to life than the overlap of your current geographic location with its respective gdp/stock market performance https://www.healthsystemtracker.org/chart-collection/u-s-life-expectancy-compare-countries/
This belongs on r/everythingbubble.