Europe still trades below the United States, but sector mix, weaker growth and lower reinvestment returns explain much of the gap. The rerating has removed the case for treating the region as uniformly cheap.
Delistings, takeovers and the retreat of domestic institutional capital are narrowing London’s quoted market. The result is a weaker valuation and financing ecosystem, even though trading in its largest shares remains functional.
European long bonds are repricing fast, back at levels last seen in 2011. The move looks financial, but the bill lands on households, companies and governments at different speeds.
The gap against US indices is usually explained by sector mix alone. Decomposing it by sector, margin profile and growth suggests the mix argument only covers part of the story.
European households hold an unusually large share of financial assets in deposits. Working through what a sustained reallocation would and would not do to domestic equity valuations.