Directly or indirectly, a host of issues stem from Europe's lack of stockmarket culture: a shortage of liquidity, reliance on US funds, a structural valuation discount and finally, equity markets short of blockbuster listings. This apparent caution first penalizes European citizens, but it also weakens their capital markets.
But is this caution real? According to a survey conducted by PwC, the answer is yes: 70% of Europeans refuse to take any financial risk, versus just 40% in the US. In particular, out of this 40% of "cautious" Americans, a quarter hold risky assets - compared with barely a tenth of Europeans.
One often underestimated factor in analysing risk aversion in Europe is the prevailing mood - the everyday atmosphere that weighs on minds. A risky investment is, first and foremost, an act of confidence. And this is where public debate and political rhetoric have a major impact. Americans have grown up steeped in the idea of American exceptionalism. If you assume the future will be better, the present becomes more bearable. Yet it is impossible to think over the long term in an environment where doubt dominates. As a result, it is very, very difficult to invest when you do not believe in the future.
A bit of political will
It is also hard to ignore the impact of public policy and regulation. Without wading into the pensions debate (even if it is never far away), other levers should be highlighted.
Take Sweden, where 36.3% of households' financial savings are invested in equities. That is very close to the level seen in the United States (39.2%).
A recipe worth drawing inspiration from - and above all proof that a culture of investing in risk assets can be built politically.
The recipe seems straightforward: remove barriers to entry as much as possible. Through a series of lasting reforms, Sweden has built a genuine culture of retail share ownership.
In the 1970s, investing through certain vehicles entitled savers to tax advantages. The country then introduced a mixed pension system, including the creation of a savings account funded by wages and linked to each person's pension.
Alongst the same lines of accessibility, simplifying taxation and investment tools played a decisive role. Today, nearly a third of Swedes use the ISK tax wrapper. Outside this investment vehicle, the flat tax is 30%, but within it, this falls to 0.888%. There is no need to declare transactions or capital gains; the tax is calculated based on the amount in the account. Admittedly, they pay tax even in loss-making years, but the first €28,000 is exempt, and the range of possible investments extends beyond the European Economic Area.
Today, "Folkaktier" ("people's shares") are a cultural phenomenon in Sweden. The term refers to local companies that have become shared symbols, where everyone can contribute to the national economy. When customers are also shareholders, governance is markedly different.
Swedish companies therefore turn to public markets more than those in other countries, and liquidity is better than in the rest of the EU.
Share of listed companies among firms with over 250 employees (Source: Financial Times)
That is enough to attract private equity and foreign investors - a key lever to further energize stock markets. Private-equity firms sometimes enable companies to reach a sufficient size to pursue an IPO. As a result, these funds exit via stock-market listings more than in other countries.
On these facts, Swedish market capitalisation reached 173% of GDP in 2024 , fairly close to that of the United States (216%) and, above all, well ahead of the UK (82.5%), Germany (46.8% - 2023) and France (103%).
The OECD has also devoted an interesting report to this Swedish singularity.
A final important argument is financial literacy - in the sense of understanding concepts and mechanisms. Investing in equities is a significant risk, but it can seem disproportionate when knowledge is lacking.
That gap further feeds Europe's reluctance.
According to the PwC study, only 18% of Europeans have a high level of financial literacy. Some 72% have never invested in a financial product, yet 86% say they are confident in managing their personal finances.
Apologies for the soup of percentages, but the point is clear: households lack the keys to open the doors to investing. Knowledge is one of them. The rise of investing among younger people has been accompanied by the rise of finance influencers and new private-sector players. It is now up to policymakers to structure and make this momentum tangible.
Share of financial savings invested in equities by country in 2022 (Source: PwC)
