The chart of the week compares the cumulative performance of the S&P 500, MSCI Europe (Local), and MSCI Europe (USD) from “Liberation Day” April 2, 2025 through July 11, 2025. All three indices initially declined in tandem, with currency having little impact during the early downturn. However, the rebound from those lows revealed the influence of currency movements—U.S. stocks and European stocks in USD both rose around 11%, while European stocks in local currency gained only about 3%. The disparity underscores the powerful effect of a weakening dollar, which has driven much of Europe’s outperformance in USD terms YTD. Going forward, we’ll be watching closely to see whether European equities can deliver on fundamentals like earnings and revenue, beyond just currency tailwinds.