The gap between European and American stock markets has widened to the largest in 30 years, with Trump's victory boosting investment in American assets

According to Zhitong Finance APP, in recent years, the lag of European stock markets compared to the U.S. market has reached its highest level in nearly 30 years, and the election of Donald Trump has further intensified the global preference for U.S. assets, potentially worsening this trend. Trump's comprehensive victory injected new momentum into the strong rebound of the U.S. stock market, with the S&P 500 index rising by as much as 25% this year, reaching an all-time high, while the European benchmark Stoxx 600 index only increased by 5%. This significant return difference has not been seen since 1995.

Trump's rise to power had already led to poor performance in the European stock market, and prior to his official inauguration, the European stock market had already suffered heavy losses. The region's economic growth continues to be sluggish, and it is expected to lag behind the U.S. again next year, without even considering the potential impact of tariffs on its exports and the possibilities of geopolitical tensions.

Michael Kelly, Global Head of Multi-Asset at Pinebridge Investments, pointed out that Europe is at a disadvantage in all trade issues, and the policies implemented by China can only slow down rather than reverse the economic slowdown, meaning that businesses or countries reliant on exports to China will be severely impacted.

Against this backdrop, investors are flocking to U.S. assets. A Bank of America global fund manager survey shows that the allocation ratio of investors to U.S. stocks continues to rise, jumping to a net increase of 29% after the election. In contrast, the allocation ratio to Eurozone stocks remains at a net decrease of around 3%, while the allocation to the UK has dropped to a net decrease of 13%.

Investors seem willing to pay a higher premium for U.S. stocks. The current expected price-to-earnings ratio of the S&P 500 index is 22.5 times, close to the post-pandemic peak, and has reached a historical high that is 70% higher than that of the Stoxx 600 index. Although Société Générale strategists believe that the U.S. stock market is "undoubtedly expensive," discussions about valuations seem to no longer dominate the mainstream.

XTB Research Director Catherine Brooks believes that the U.S. will continue to dominate. She pointed out that the acceleration of economic and earnings growth, along with market momentum, gives the U.S. stock market a clear advantage over the European stock market, which may struggle to catch up