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One of the stories for markets this year has been the outperformance of European stocks relative to U.S. ones.
Through Thursday, the S&P 500
SPX,
has gained 7% in 2023, compared with a 10% advance for the Vanguard FTSE Europe ETF
VGK,
Analysts at Goldman Sachs say the outperformance can continue, and one reason is highlighted in this chart.
The U.S. market is led by technology stocks, which are relatively scarce in Europe, but every single sector trades more cheaply in Europe than in the U.S.
Goldman Sachs/FactSet
The Goldman strategists say what they call GRANOLAS — the grouping of GSK
GSK,
Roche
ROG,
ASML
ASML,
Nestlé
NESN,
Novartis
NVS,
Novo Nordisk
NVO,
L’Oreal
OR,
LVMH
MC,
AstraZeneca
AZN,
SAP
SAP,
and Sanofi
SNY,
— are enjoying premium margins, while the margins of U.S. megacap stocks have come under pressure.
The GRANOLAS account for 23% of the market cap of the Stoxx Europe 600, while Facebook parent Meta Platforms, Amazon, Apple, Microsoft and Google parent Alphabet account for 18% of the S&P 500.
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