European stock indices 2024 performance review: a two-year reflection from expectations to reality

As we enter 2026 and look back at Europe’s capital markets in 2024, the year filled with expectations and hope has become history. How did the optimistic forecasts for European stock indices in that year hold up? This article will revisit the performance logic and investment value of European stock indices from a two-year perspective.

In early 2024, the performance of major European stock markets did not disappoint. Germany’s DAX index rose nearly 10% for the year, France’s CAC 40 increased by 8.29%, and the STOXX 600, covering 90% of European listed companies’ market cap, gained close to 7%. Behind these figures is the reassessment of European stocks by global capital flows.

Why Do European Stock Indices Attract Global Capital? Market Sentiment in Early 2024

What made the market environment in early 2024 so favorable for European stocks? The key lies in the convergence of three factors.

First, valuation attractiveness. Compared to the US S&P 500’s forward P/E of about 19, European stocks traded at only 14, making them relatively more value-oriented. Second, the easing inflation in Europe paved the way for the European Central Bank (ECB) to cut interest rates. Data released in February 2024 showed Eurozone inflation had fallen to 2.6%, down for three consecutive months and below the 3% warning level. Third, market expectations of declining interest rates directly stimulated capital inflows. Statistics show that funds focused on European indices attracted up to €45.7 billion in Q4 2023, with an annualized growth rate exceeding 45%. A survey by U.S. banks also indicated that professional investors were net buyers of European stocks in February 2024.

These three positive factors together formed the main drivers behind the rise of European stock indices that year.

Three Decades of Fluctuations: The Historical Cycles and Market Laws of European Stocks

To understand the logic behind European stock index movements, we must look at a broader time horizon. The STOXX 600, representing 600 leading European companies, has a 30-year volatility trajectory that reflects global economic cycles.

In the late 1990s, European markets entered a prolonged downturn. The Asian financial crisis and subsequent Russian financial crisis caused European indices to fall. This was followed by the internet bubble frenzy and burst. On the eve of the new millennium, valuations of tech startups soared to unsustainable levels, leading to a brutal correction in 2000–2001.

The early 2000s saw a brief global market dip after 9/11, but European stocks then experienced several years of recovery and prosperity. Rapid growth in international trade, integration of emerging economies, and low-interest policies by central banks kept European indices rising until 2008.

However, the 2008 global financial crisis changed everything. Lehman Brothers’ bankruptcy, sharp credit tightening, and severe economic recession caused European stocks to experience their worst decline ever. The subsequent European debt crisis worsened the situation. Sovereign debt issues in Greece, Ireland, Portugal, Spain, and Italy sparked serious concerns about the euro area’s stability.

A turning point came with the implementation of quantitative easing. Coordinated actions by the ECB and other central banks gradually stabilized markets, and European stocks began a long-term recovery from 2009. Although the COVID-19 pandemic in 2020 caused a brief setback, swift interventions—asset purchases and fiscal support—enabled markets to rebound quickly.

These 30 years of ups and downs teach a profound lesson: the timing and strength of policy interventions often determine the long-term trend of European stocks.

Sector Divergence Intensifies: Long-term Performance of Industry, Tech, and Consumer Sectors

Between 2023 and 2024, European markets showed clear sector differentiation. Information technology, discretionary consumption, and industrial production emerged as the top performers.

The industrial sector includes aerospace, manufacturing, and construction. Airbus benefited from frequent Boeing issues, with its stock soaring, but its P/E ratio reached nearly five-year highs of 35.60. Maintaining this valuation requires solid business contributions. Technically, support levels are around €136, with RSI above 70 indicating increasing correction pressure.

The tech sector rose 19% over the past year, led by SAP. The German software giant’s stock broke through its medium- and long-term upward channel, suggesting stronger momentum. However, its P/E ratio at 56.39 is extremely high—only one quarter in the past decade exceeded this—justifying potential downside. Negative divergence between RSI and price also signals short-term correction risks.

Discretionary consumer stocks remain vital to Europe’s economy. Pandora, a Danish jewelry company, grew over 90% in 2023. Despite severe setbacks in China, global revenue increased 6% year-over-year, with organic growth at 8%, surpassing market expectations. Yet, due to the rapid rally, short-term pullback risks are evident.

Three Pathways to Investing in European Stocks: From Brokers to ETFs to Derivatives

For investors interested in European stocks, the market offers diverse options.

Direct trading via brokers is the traditional approach. Platforms support market orders, limit orders, stop-losses, and other order types, allowing investors to own shares and voting rights. The downside includes trading fees, platform costs, and potentially higher transaction costs for multiple stocks. Many brokers also offer limited leverage.

Investing through ETFs suits those seeking index exposure with low fees. Large ETFs include Vanguard FTSE Europe (VGK, $14.816 billion AUM, 0.09% expense ratio), iShares MSCI EMU (EZU, $5.57 billion, 0.49%), and iShares Core MSCI Europe (IEUR, $4.197 billion, 0.09%).

Trading derivatives via CFDs offers the highest capital efficiency. CFDs allow margin trading—investors only need to deposit a fraction of the contract value—amplifying gains. They support long and short positions, enabling profit from both rising and falling markets. Regulated brokers like Mitrade (ASIC regulated) provide zero commissions, low spreads, and leverage up to 1:200, with stop-loss and take-profit features.

Risks and Opportunities: Market Lessons from 2024 to 2026

The optimistic outlook for 2024 was not entirely unfounded but faced real challenges. Factors supporting continued growth include easing inflation, potential profit increases, and attractive valuations. Citibank forecasts a 3% EPS growth for European stocks in 2024, while Goldman Sachs expects around 7% profit growth.

However, risks are also evident. European governments are gradually withdrawing energy subsidies and normalizing post-COVID liquidity, which could dampen growth in energy, logistics, and industrial sectors. Eurozone GDP growth estimates have been revised down from 1% to 0.5%, reflecting macroeconomic weakness. The Russia-Ukraine conflict persists into its third year, maintaining geopolitical risks.

Looking at 2026, the conclusion is that the investment logic of European stocks ultimately depends on the interplay of risks and opportunities. With manageable and predictable risks, ongoing policy support from the ECB, and valuation appeal, the investment opportunities represented by European indices remain attractive for investors to monitor closely.

Summary: Why the Investment Logic of European Stocks Remains Timeless

European stock markets comprise various national markets, each with unique trading hours and holiday schedules. As a relatively free economic union, European indices have experienced numerous mergers, acquisitions, and consolidations over time. From this perspective, viewing European stocks holistically rather than focusing excessively on individual countries is the correct way to grasp their market patterns.

Currently, the appeal of European stocks lies in their relatively low valuations, stable policy environment, and potential for valuation recovery relative to US markets. When considering European investments, investors should weigh macroeconomic outlooks, industry cycles, and individual stock fundamentals comprehensively. Past two years of market validation show that patiently tracking European indices and entering at appropriate moments remains a rational approach to building an international investment portfolio.