Europe’s Pitch Book: Europeans still prefer to invest at home
The desk notes that despite prevalent pessimism about Europe's economic outlook, Europeans continue to show a strong preference for domestic investments. Per the full note by Marieke Blom, about 50% of the equity holdings of eurozone households are invested in EU-issued equity, indicating a significant home bias that contrasts with global investment patterns. This behavior could have broader implications for capital availability in Europe, affecting growth and innovation. Given these dynamics, our outlook for EUR/USD remains constructive, particularly as local investments stimulate the economy and bolster currency confidence.
What the desk is arguing
The desk contends that the enduring preference of European investors for domestic markets is a key indicator of potential economic resilience in the eurozone. According to Marieke Blom's analysis, the significant home bias—whereby Europeans invest approximately five times more in their own markets compared to a globally diversified portfolio—underscores their confidence despite economic challenges.
This trend is substantiated by data from the European Central Bank, which reveals that by the end of 2024, eurozone households will hold a substantial portion of their equity investments in EU-issued assets, comprising nearly 50% of their total equity holdings. This is notable given that EU equity comprises roughly 10% of global market capitalization, suggesting an underappreciated local investment drive.
The alternative read would be to accept the narrative that Europe's economic challenges are driving investors away, yet the evidence suggests that local investors are more inclined to support homegrown businesses than to seek opportunities elsewhere.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Europeans show strong home bias in equity investments, favoring domestic assets over global diversification.
- 02By end-2024, approximately 50% of eurozone households' equity holdings will be in EU-issued securities, indicating confidence in local markets.
- 03European investment trends could bolster innovation and growth, impacting the currency's performance positively.
- 04The current outlook suggests that as domestic investments increase, they may help stabilize the euro against other major currencies.
Market implications
Traders should watch the EUR/USD around the pivotal level of 1.075. The ongoing preference for domestic equities could strengthen the euro, particularly as local investments fuel economic recovery. A keen eye on household equity trends will be essential for gauging currency movements in the coming months.
Risks to this view
Long USD positioning could invalidate the bullish outlook for the euro if external shocks, such as shifts in global equity markets or significant policy changes from the ECB, lead to increased capital outflows from Europe. Additionally, if economic conditions within the eurozone worsen unexpectedly, the preference for local investments could quickly diminish, reinforcing a bearish tone in the euro.
Opinions Opinion by Marieke Blom Europe’s Pitch Book: Europeans still prefer to invest at home Published 07:35 Despite widespread pessimism on Europe’s economy and outlook, Europeans are still keen to invest here One of the key reasons for writing this series is to challenge some of the overly negative assumptions about Europe and reflect on the continent’s strengths, which are often overlooked. This matters because perceptions influence investment decisions. My thinking is simple: if we focus too heavily on the negatives, who would want to put their money to work here?
Wouldn’t Europeans decide to invest their money abroad instead? And that has broader implications: weaker investment means less capital available to support European companies, innovation and growth. First, let’s look at what Europeans actually do.
The European Central Bank found that by the end of 2024, about half of the equity holdings of eurozone households had been invested in EU-issued equity. Yet EU-issued equity makes up only about 10% of global market capitalisation. This implies a significant home bias, with Europeans investing about five times more in Europe than we would expect to see if they picked a globally diversified portfolio.
Eurozone household equity holdings, by issuer region (4Q24 percentage points of total) Listed shares held by euro area households (institutional sectors S.14, S.15, and S.1MU) by issuer region for the 20 euro area countries at the end of Q4 2024. The dataset includes only listed shares issued by non-financial corporations (institutional sector S.11) and banks (institutional sector S.122) held by households directly, by purchasing shares in them or via investment fund shares. Investment fund holdings are analysed on a look-through basis.
Source: ECB (SHS), LSEG, and ECB calculations "> Listed shares held by euro area households (institutional sectors S.14, S.15, and S.1MU) by issuer region for the 20 euro area countries at the end of Q4 2024. The dataset includes only listed shares issued by non-financial corporations (institutional sector S.11) and banks (institutional sector S.122) held by households directly, by purchasing shares in them or via investment fund shares. Investment fund holdings are analysed on a look-through basis.
Source: ECB (SHS), LSEG, and ECB calculations Still, things may have changed since then. So secondly, let’s see what Europeans have to say today. Over the summer, we conducted a consumer survey in Germany, France, Italy, Spain, the Netherlands and Belgium.
This is part of a deep dive into their saving and investment behaviour, which we are publishing this week (stay tuned!). Here’s a sneak peek: we asked people where they (would) prefer to invest. The results showed that 40% preferred to invest in their own country, while 38% preferred Europe.
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