Reversal to the mean

Since 2009, the US equity market has outperformed its European counterpart by nearly 300%, shaping the perspective of a whole generation of younger portfolio managers who have only known European stocks as persistent underperformers. There are valid reasons for the US to lead, as we've discussed many times before. Today, the US equity market's dominance is undeniable, accounting for over 50% of global market capitalization and more than 70% of the MSCI World Index. This raises the question of whether European stocks might eventually experience a 'reversion to the mean.' History suggests that such a shift is possible; for example, in the early 2000s, European stocks significantly outpaced their US peers. As value investors, we believe a catch-up is likely when the Old Continent finally implements the necessary structural reforms to restore competitiveness.