Twelve Charts This Week - 5/3/2024

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These two charts show that US AND EUROPEAN STOCK INDICES moved roughly in line from 1990 to 2009 but have diverged by a factor of 3x since 2009. The main explanation for this divergence is the greater number of innovative companies in the US. As we discussed in TCTW - 4/12/2024 , the US has a large number of ‘wide moat’ companies that are able to grow revenues and generate vast amounts of free cash flow. Europe has some such companies (for example Novo-Nordisk, LVMH, L’Oréal and others), but not nearly enough to drive the indices. Another explanation is that the US has allowed a lot of sectors to consolidate down to a small number of very large national players. Think for example airlines, banking or telecom. European consolidation has been less intense and many companies have smaller markets than their US counterparts. (via @MichaelAArouet and the Financial Times)