European companies' profits grew by approximately 16% year-on-year in the second quarter, the fastest pace in three years; the manufacturing PMI returned to expansion territory after three consecutive years of contraction, and banks also benefited from interest rate normalization and a credit cycle recovery. This means that the valuation discount of European stocks relative to US stocks, at approximately 16 to 20 times, is beginning to be supported by earnings and economic data. The relatively high weighting of its financial, industrial, energy, and consumer sectors also provides investors with an option to reduce their exposure to US technology and AI concentration.
