Over the past decade, Europe’s equity leadership has shifted towards high-growth companies like ASML, LVMH, and SAP, delivering strong returns. The Morningstar Europe Index now reflects this change, with technology and industrials gaining prominence while energy and consumer defensives decline. Valuations in some sectors are looking appealing, according to Morningstar analysts.

In 2015, the Morningstar Europe Index was dominated by traditional defensive stocks like Nestlé, Novartis, and Roche. Fast forward to 2025, ASML and SAP lead the index, signaling a preference for innovation-driven growth. The rise of technology, luxury, and modern industrial stocks reflects European investors’ appetite for global growth trends.

ASML stands out with a 26% annualized return over the past decade, followed by LVMH, SAP, AstraZeneca, and Siemens with strong double-digit growth. This contrasts sharply with the weaker performances of traditional defensive giants like Nestlé, Roche, and Novartis, highlighting a shift in investors’ preferences towards tech-led companies.

The sector composition of the Morningstar Europe Index has transformed significantly over the years. Industrials and technology have significantly expanded their weight, while consumer defensives, energy, communication services, and real estate have declined. This shift illustrates a move from defensive, low-growth sectors to a more dynamic and cyclically sensitive index profile.

European stocks are seeing the rise of global champions in technology, luxury, pharmaceuticals, and industrial engineering. ASML, SAP, and LVMH are key strategic stocks commanding leadership in their respective sectors. Even traditional sectors like pharmaceuticals are experiencing differentiation, offering both growth-oriented and defensive opportunities for investors.

Looking ahead, European equities are poised for growth with favorable macroeconomic conditions. Valuations in consumer defensive stocks, tech, and healthcare appear attractive. However, Europe faces challenges such as potential cuts to social programs, competition from China, and the need for regulatory improvements. The global landscape is rapidly evolving, signaling potential shifts in the next decade for European industries.

Read more at Morningstar: How the European Stock Market Has Changed in a Decade