BlackRock Bets on U.S. Equities Outperforming European Stocks: Earnings Cycle to Accelerate from July

TradingKey - In the first half of 2025, uncertainty over Trump’s trade policies and U.S. fiscal outlook prompted global investors to shift capital away from U.S. assets and into European equities. While European stock indices outperformed their U.S. counterparts in H1, BlackRock, the world’s largest asset manager, is betting that U.S. equities will regain momentum in the second half, as corporate earnings begin to accelerate in July.

On Wednesday, July 2, Wei Li, chief Investment strategist at BlackRock, said that the underperformance of U.S. stocks relative to European equities this year is unlikely to persist — as U.S. companies are expected to benefit from stronger adoption and investment in artificial intelligence (AI), leading to more robust profit growth.

Comparison of S&P 500 and Stoxx 600 Indices, Source: TradingView

In the first half of the year, the S&P 500 rose about 5%, lagging behind the Stoxx 600’s 7% gain, which was driven by expectations of large-scale stimulus measures in Europe.

Furthermore, according to data from Lipper Funds under LSEG, inflows into European equity funds have exceeded $100 billion in 2025, tripling the amount seen during the same period last year. Meanwhile, outflows from U.S. equity funds have doubled to $87 billion.

The divergence in index performance and fund flows seems to support the so-called "Sell America, Buy Europe" narrative — reflecting declining investor confidence in the stability of U.S. policy.

However, as concerns over Trump’s tariff policies ease, “Big Beautiful Bill” moves closer to final passage, and AI demand remains strong, strategist sentiment toward U.S. equities has started to improve in the second half.

BlackRock noted that despite ongoing uncertainties, markets remain in a risk-on mode.

The firm expects U.S. corporate earnings in Q2 to grow by 6% year-over-year, significantly outpacing the 2% expected for European firms. In Q1, the respective figures were 14% for U.S. companies and 2% for European firms. 

BlackRock believes the next round of U.S. earnings acceleration will begin this month.

The firm emphasized that the underlying strength, dynamism, and innovation potential of U.S. listed companies remain unparalleled among global peers.