Where Investors Find Refuge From Tech’s Storm

Europe doesn’t have a






or a


But perhaps what used to be a problem for investors isn’t so bad after all.

Since the start of 2017, the more tech stocks a region had, the better it performed in local-currency terms, according to


Asia, outside Japan, and emerging markets were the top performers, followed closely by the U.S. The S&P 500’s information technology sector, which accounts for a quarter of the index, gained 37% last year, powering a 19.4% gain for the market overall. Even that understates things, as Amazon and Netflix count as consumer-discretionary stocks.

By contrast, the Euro Stoxx index of eurozone companies, with just 7% in tech, was up 10.1%, although it was also held back by the stronger euro. Strikingly, the market capitalization of the S&P 500 information-technology sector, at $5.5 trillion, outstrips the whole Euro Stoxx index, at $5.1 trillion.

But now, whether it is questions over Facebook’s handling of users’ data, or President

Donald Trump’s


broadsides against Amazon, tech is facing tougher times. In this environment, Europe’s lack of tech may be a hidden charm. Fundamentally, if global growth is better, then tech’s allure should dim naturally.

And in valuation terms, Europe looks less stretched. The SPDR Euro Stoxx 50 ETF, for instance, trades for 13 times forward earnings, similar to the broader Euro Stoxx index. The eurozone is clearly earlier in the economic cycle than the U.S. and monetary policy is still ultraloose. As the European Central Bank starts to tighten policy, lifting bond yields in the process, that should be good news for the financial sector that has a big weight in European markets.

Europe, of course, isn’t an island. If the U.S. market falls rapidly, so will Europe. And if global growth is really rolling over, then European stocks will suffer. But if the market turmoil is more about questioning the business model and valuation of the highflying tech sector, then Europe, unusually, could be something of a port in the storm.

Write to Richard Barley at richard.barley@wsj.com

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