Monthly Market Views: European selectivity, rising bond yields and AI productivity
KEY POINTS
Selectivity in European equities
Received wisdom has it that the energy shock triggered by the Iran war is worse for Europe than for the US, as the former is an energy importer while the latter an exporter. This is true from a GDP point of view, but it matters little to a company or an individual if the energy that now costs them more was imported or produced domestically.
Nonetheless, Europe does seem to be doing worse economically than the US. European Purchasing Managers’ Indices show a deterioration in both the services and manufacturing sectors while activity has increased in the US. Equity markets seem to tell a similar story. The MSCI Europe index was in negative territory at the end of May relative to its level before the war started, while the S&P 500 was up 10%. This gap, however, was driven largely by strong returns for technology stocks. Excluding tech, Europe still lags, though by less. Looking only at companies that are expected to benefit from the European Union’s ‘strategic autonomy’ initiative1, the gap largely disappears. Selectivity will be key to potential success in investing in European equities this year.
- EU strategic autonomy 2013-2023: From concept to capacity | Think Tank | European Parliament Source for all data: FactSet, Bloomberg, BNP Paribas Asset Management as of 29 May 2026, unless otherwise specified. Past performance should not be seen as a guide to future returns.
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