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The great net income divergence, revisited
07/11/2025
For over a decade, the S&P 500’s net income growth has outpaced Europe’s Stoxx 600. But signs of change are emerging beneath the surface.
Since the financial crisis of 2009, global equity markets have diverged rather than converged. In terms of aggregated net income, a wide gap has opened up between the U.S. S&P 500 and its global peers, such as Europe’s Stoxx 600. Both the S&P 500 and the Stoxx Europe 600 indices began their post-crisis journey with similar profits—just over 0.5 trillion U.S. dollars (USD).[1]
Of course, index composition explains much of the story. The S&P 500’s profit engine is powered by a handful of U.S. tech and communications titans. The top 10 companies now account for 32% of total net income, up from 24% in 2009, reflecting record concentration. The top 10 European companies started with a similar weight in 2009, but now account for just 16% of profits. At first, this seems like a disadvantage, but it can also mean resilience. Interestingly, though, a big gap also remains if you consider more traditional sectors, such as industrials and financials.
Our Chart of the Week shows that financials have driven both Europe’s underperformance after the crisis and its recent revival. Financials dominate Europe’s Stoxx 600, contributing a third of net income, while industrials and healthcare play larger roles than in the U.S. That said, many European industrials, once a source of strength, appear structurally challenged. Overall, Europe’s broader sector base has delivered steadier but less spectacular growth.
So, can Europe and its Stoxx 600 offer more than just greater diversification at still somewhat more reasonable valuations? As Thomas Bucher, Global Equity Strategist at DWS, argues, “U.S. equities are clearly expensive. However, relative to their impressive double-digit EPS growth, valuation might not yet be that scary.” Meanwhile, we are starting to see some encouraging signs in Europe at the company level. Targeted stimulus—most notably Germany’s infrastructure push—is beginning to shift the dial. But it is still early days, and given recent strength in European equity markets, sustaining earnings momentum will be key.
A transatlantic profit chasm even in sectors such as industrials and financials
Sources: Bloomberg Finance L.P., DWS Investment GmbH as of 11/4/25
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