Consumer Discretionary Sector Has Driven European Equity Performance YTD

As inflation fears have receded somewhat—though we’ll see in next week’s US CPI report how much they really have receded—European stocks have had a good start to the year.

In the table below, I take the top 85% by market cap of large-mid firms from European developed markets. I then break out the performance by sector to see the underlying performance trends. Year-to-date the more growth-oriented sectors have led the pack while the more value-oriented have lagged. The consumer discretionary sector in particular has driven performance year to date. This could be attributed to the China re-opening trade as investors expect a torrent of Chinese spending on luxury goods, which European consumer discretionary stocks specialize in. It could also be driven by domestic spending as energy prices have not climbed to heights feared earlier in the Ukraine conflict.

DM EMEA Performance YTD

The consumer discretionary sector only represents about 9% of companies in Europe, so a relatively small proportion of the stocks are driving performance.

Top 85% Number of Companies by Sector

To give an idea of how popular European consumer discretionary stocks have been this year, fully 89% of them are outperforming the Morningstar Developed Markets Large-Mid Index year to date. This contrasts to just 4% of European energy stocks that have outperformed year to date.