Susie James, a retired small business owner in Wales, has observed the recent swings in the stock market with only mild interest. Like many Europeans, Ms. James and her husband hold a significant percentage of their savings in cash, the product of a long-held distrust of the market.
“I’m old enough to have lived through two major crashes,” said Ms. James, 67, recalling the market panic on Black Monday in 1987, when her father lost 10,000 British pounds (about $38,000 today), and the 2008 financial crisis. Her retirement account has earned less than major stock indexes, and to her, investing in the market has brought “just bad experiences.”
Europeans on average save more of their money than Americans, but they have far lower rates of investment in the stock market. While Americans keep only a tenth of their financial assets in cash and low-risk deposits, for Europeans it’s a third, the European Central Bank says.
This conservative approach has insulated many Europeans from the extreme market volatility of recent weeks as President Trump’s tariffs have roiled the global economy. But it has also meant that many have missed out on substantial stock market gains over the long-term, and that the continent has lost out on trillions of dollars in investment, according to Christine Lagarde, the president of the central bank.
About 33 percent of European Union households invest in stocks and investment funds, compared with 51 percent in the United States, according to Bruegel, an economic research institute in Brussels.
And within Europe, there are differences: Rates of investment in stocks, bonds and other traded funds are higher in Scandinavian countries and lower in Spain, France and Italy, three of the continent’s biggest economies, where less than 30 percent of adults invest, according to a 2024 survey conducted by BlackRock and YouGov.
The biggest reasons those surveyed cited for not investing were financial constraints and insufficient knowledge about how to do so.
Complex and costly
In European countries, investing by individuals tends to be more expensive and complex than in the United States, where low-cost index funds, like Vanguard mutual funds, have been widely available for decades, said Rebecca Christie, a senior fellow at Bruegel.
In Europe, “there is a lack of accessible products that are presented in a manageable way,” Ms. Christie said.
The continent also has a patchwork of corporate, tax and securities laws, with different countries observing their own rules, which contributes to the complexity, she said. Against this backdrop, Europeans, who tend to be more risk-averse with their money than Americans, have prioritized the certainty of low-risk savings accounts over the potential rewards of the stock market, she added.
Retirement and social security
Another factor is how Europeans and Americans tend to plan for retirement.
In recent decades, many U.S. employers have shifted from defined benefit plans, which guarantee retired workers a set monthly payment, to defined contribution plans, in which employees and employers contribute to individual accounts that are invested, usually in the stock market. This means that more Americans have direct exposure to stocks.
Historically, more generous social safety nets and greater access to free public health care in certain countries have meant that many Europeans see less of a need to take risks with the stock market.
While these services have begun to struggle in recent years, in Britain, Ms. James said, the perception has long been that “if you can’t look after yourself, the state will provide.”
Market performance
U.S. stocks have consistently earned greater returns than those in Europe, proving lucrative for individual investors over time despite occasional downturns.
Over the past decade, the S&P 500 has risen 158 percent, compared with 23 percent for the benchmark Pan-European index, the Stoxx Europe 600.
For Americans, “there’s this real fear of missing out if people are not in the stock market,” said Constantine Yannelis, an economics professor at the University of Cambridge, “and that’s less true in Europe.”
This has contributed to a widening wealth gap between Europe and the United States. Ms. Lagarde said last year that U.S. household wealth had grown roughly three times more than that of E.U. households since 2009.
The current turmoil
All this means that Europeans who keep most of their savings in cash and bank deposits may be somewhat insulated from the current stock market volatility. But Nathan Sheets, Citibank’s chief economist, said that Mr. Trump’s tariff policies mean there will most likely be “plenty of pain to go around” in other ways.
Among the possibilities, Mr. Sheets said, is plunging demand for European products if they become significantly more expensive in the United States. That could lead to layoffs at European exporters and, ultimately, lower economic growth.
As Mr. Trump raises tariffs on Chinese goods, Beijing could dump its low-cost goods in other markets, where European manufacturers may find it more difficult to compete.
That uncertainty in demand for European products could be “the most pernicious effect” of the trade war, Mr. Sheets said — a blow to economies and markets that will undoubtedly be felt by individual Europeans.
