European stock markets are trading at lower valuations than US markets. The macroeconomic picture in Europe has been steadily improving. German elections and US tariffs have benefitted markets. European stocks were less buoyant in Q3, rising by just 2%. Lower inflation and interest rates in Europe benefit consumers and businesses. Healthcare, consumer defensive, and cyclical stocks in Europe are undervalued. Europe still has a cheaper relative valuation and an improving economic backdrop. Luxury goods, automotive stocks, and UK homebuilders are looking promising in the consumer cyclical sector. The outcome for European and US markets in 2026 will depend on factors like trade policies and tech sector performance.

Read more at Morningstar: Where Investors Can Find Value in Q4