Macquarie Global Strategy argues that European assets are being systematically undervalued by investors who remain fixated on American technology dominance.
The firm identifies several structural pillars underpinning a stronger European investment case, including luxury goods, tourism, and pharmaceuticals.
The global luxury goods and experiences market is valued at approximately $1.6 trillion and is projected to surpass $2 trillion by 2030, with European brands leading the sector.
Key names driving that dominance include Hermes (EPA: RMS), LVMH (EPA: MC), and Ferrari (NYSE: RACE), which together represent the kind of irreplaceable brand equity that U.S. markets cannot easily replicate.
Europe’s international tourism sector generates roughly $1 trillion annually, a figure that is approximately five times the equivalent U.S. level, reflecting the continent’s unique cultural and geographic appeal.
In pharmaceuticals, European and Swiss firms including Roche (SIX: ROP), Novartis, Sanofi, and Novo Nordisk (NYSE: NVO) remain scientifically competitive with their American counterparts across both research and product pipelines.
Technology has historically been Europe’s most cited weakness, given its failure to produce the innovation clusters that powered U.S. productivity and equity market outperformance, though Europe still accounts for around 20% of global patents.
The investment thesis, however, may hinge less on creating technology and more on deploying it, with approximately 37% of EU companies having used artificial intelligence in 2025, a rate broadly comparable to U.S. adoption levels.
European businesses also match or exceed American peers in certain advanced digital applications, particularly in industrial robotics, which supports productivity gains without requiring homegrown tech giants.
Earnings momentum adds further weight to the argument, with Europe excluding the U.K. forecast to deliver earnings-per-share growth of around 19% in 2026, up sharply from the roughly 12% figure anticipated in December 2025.
European equities continue to trade at an equity risk premium discount of more than 300 basis points relative to U.S. markets, a gap that Macquarie views as an opportunity rather than a justified structural penalty.
Return on equity for European companies stands at around 11%, well below the roughly 23% recorded for S&P 500 constituents, but Macquarie sees Europe’s large pool of surplus capital and growing pressure for higher fiscal spending as potential catalysts for closing that gap.
