Europe Shows Calm Amid Stock Market Volatility

Susie James, a retired small business owner in Wales, has watched the recent turbulence in global stock markets with little more than passing curiosity. Like many Europeans, she and her husband keep a substantial portion of their savings in cash, a decision rooted in decades of skepticism toward financial markets.

"I'm old enough to have lived through two major crashes," said Ms. James, 67, reflecting on Black Monday in 1987, when her father lost 10,000 British pounds (equivalent to roughly $38,000 today), and the 2008 financial crisis. Her retirement savings have underperformed major stock indices, reinforcing her belief that investing brings "just bad experiences."

Across Europe, households tend to save more than their American counterparts but invest far less in the stock market. According to the European Central Bank, Europeans hold about a third of their financial assets in cash and lowrisk deposits, compared to just a tenth for Americans. This cautious approach has shielded many from the recent market volatility triggered by global trade tensions, but it has also meant missing out on longterm gains. Christine Lagarde, president of the European Central Bank, has pointed out that this reluctance has cost the continent trillions in potential investment.

Data from Bruegel, a Brusselsbased economic research institute, shows that only 33 percent of European Union households invest in stocks or investment funds, compared to 51 percent in the U.S. The disparity is even starker within Europe itself. Scandinavian countries have higher investment rates, while major economies like Spain, France, and Italy lag behind, with fewer than 30 percent of adults participating in the market, according to a 2024 survey by BlackRock and YouGov.

Financial constraints and a lack of investment knowledge were the most common reasons cited by those who avoid the stock market. Rebecca Christie, a senior fellow at Bruegel, noted that investing in Europe is often more expensive and complicated than in the U.S., where lowcost index funds have been widely available for decades. "There is a lack of accessible products that are presented in a manageable way," she said.

Europe's fragmented regulatory landscape, with each country enforcing its own corporate, tax, and securities laws, adds another layer of complexity. Combined with a generally riskaverse culture, this has led many Europeans to favor the security of savings accounts over the uncertainties of the stock market.

Retirement planning also plays a key role in these differing attitudes. In the U.S., the shift from employerguaranteed pensions to defined contribution plans has forced more Americans into the market. Meanwhile, Europe's stronger social safety nets, including free public healthcare in many countries, have reduced the perceived need for individuals to take financial risks.

For Ms. James, the safety net provided by the British state has long reinforced her cautious approach. "If you can't look after yourself, the state will provide," she said. While this mindset has spared her from market downturns, it has also limited her financial growth—a tradeoff that many Europeans continue to make.