Is the European financial market Americanised yet?
Given the fact that eight of the world’s 10 biggest companies as measured by market cap are American, it’s no surprise that big-name investors are favouring U.S. stocks over their international counterparts.
This begs the question: Is the European financial market Americanised yet?
To get the complete picture, Investing.com joined forces with SEMrush, an online visibility management and content marketing SaaS platform, to produce an analysis of whether European investors favour American stocks over their local equivalents. By data of the most popular stocks in each country, with SEMrush’s data on keyword popularity, we’ve mapped the European investor’s preference, by country.
The results reveal that while investors in Europe’s smaller countries generally favour American stocks, those in larger nations with more established local financial markets prefer to invest domestically. The full breakdown is as follows:
Investors that favour local stocks — Russia, Germany, Spain, Italy, France, Greece, Sweden, Norway, Finland, Denmark, Poland, Turkey
Investors that favour U.S. stocks — United Kingdom, Switzerland, Netherlands, Austria, Portugal, Belgium As well as — Hungary, Macedonia, Ukraine, Romania, Belarus, Bulgaria, Iceland, Czech Republic, Serbia, Ireland, Lithuania, Latvia, Croatia, Estonia, Albania, Kosovo, Cyprus, Malta, Monaco, Slovakia, Liechtenstein, Moldova, Bosnia and Herzegovina, Montenegro, Slovenia
“It makes sense for traders in a country like Germany - a true European powerhouse - to take up the most interest in their own local “home grown” companies like Volkswagen, Bayer and Deutsche Bank,” states Jesse Cohen, U.S. Markets Analyst at Investing.com. “The same goes for France, Italy, Russia and Spain, respectively Europe’s third, fourth, fifth, and sixth largest economies. On the flip side, investing in U.S. stocks that are traded on Wall Street has become much easier in terms of accessibility thanks to trading apps and online brokers, a development which may have led to a spike in interest in U.S.-based stocks, specifically Eastern European countries, such as Croatia, Serbia and Albania.”
Yet the elephant in the room is the UK, as investors in Europe’s second largest economy buck the trend in our analysis through their preference for American stocks over local investments.
“There are two things at play here,” says Clement Thibault “First, culturally, the UK and the U.S. have historically been more similar than the U.S. and the rest of Europe. While many European investors may be too proud to look for more attractive returns on the other side of the pond. Second, Brexit uncertainty is definitely a big factor here, and UK investors being more interested in U.S. stocks does point to a lack of confidence and fear of uncertainty regarding the future of the UK’s economy.”
Sweden, Norway, Denmark and Finland are the other outliers in our analysis, with investors from each country favouring local stocks, despite not being European powerhouses. Is there something in the air in Scandinavia that’s keeping local investors interested in the home front?
“With relatively high-income equality, large, tax-financed welfare programs, powerful unions, good education systems and relatively low unemployment rates, the benefits of living in Scandinavia have long been touted,” said Thibault. “In fact, according to the 2018 World Happiness Report, four out of the top five happiest countries in the world are from the region. With all things considered, it’s no surprise to see Scandinavian investors preferring to look inward.”
So, to revisit the initial question, is the European financial market Americanised yet? Yes, over 70% of countries in Europe are indeed choosing to invest in the American market rather than locally. However, the biggest economies in Europe are still happy investing domestically and haven’t quite jumped aboard Uncle Sam’s ship, at least not yet.