European equities: not all about defense

As the year is drawing to a close, time to look at what drove European equities in 2025. On a sector level, banks have been the absolute star this year, with the STOXX 600 Banks price index up 61% year-to-date (as of 16 December), followed by utilities and construction & materials. On the negative side, automotive stocks, chemicals and media were the biggest laggards.

In terms of contribution of individual stocks to the broader index, up to yesterday, the top contributor was ASML, followed by Banco Santander and HSBC. Novo Nordisk was the biggest detractor, taking away 1.3% of the performance of the index due to its high starting index weight. Rheinmetall, while up 145%, contributed only 0.43% to the performance of the broad index due to its relatively low starting weight. Noteworthy too is that the top 10 contributors, representing only 14% of the weight of the index, explain almost 40% of its performance — quite top heavy.

Our best guess is that financials will stay relevant next year, as the interest environment remains benign and valuations still do not appear excessive despite the prolonged rally. But a disciplined investment process like ours will remain key in 2026.