European stock markets are doing better than okay, but investors there still look across the pond and wonder, “Why can’t that be us?”

Over the weekend, the Financial Times published a chart-heavy analysis that explored why equity markets in Europe — despite those record highs — are suffering lower trading volumes and a drip-drip IPO market while losing ground to a relatively more vibrant US equities infrastructure.

0-for-7

By now, most market-watchers are familiar with the Magnificent Seven, the seven tech stocks (Alphabet/Amazon/Apple/Meta/Microsoft/Nvidia/Tesla) that now account for about 30% of the value of the entire S&P 500 index. Those seven stocks collectively rose by about 120% from the S&P’s most recent low in October 2022 to the middle of January 2024, accounting for roughly 60% of the S&P 500’s return in that time.

In case you haven’t noticed, the Seven have a shared nationality: they’re all American. As a result, a virtuous cycle took hold — asset managers and pension funds from around the world couldn’t afford to miss out on hitching a ride with those seven stocks and continued to pour money into them and their US exchanges. Europe does have some very large tech companies (SAP, Vodafone), they just don’t have the very large tech companies that have dominated the investing mindshare over the last decade or so. Part of that also stems from Europe not having a Silicon Valley — and not having a venture-capitalist culture of betting regularly on supernova growth companies, some of whom will fail and some of whom become Nvidia.

But other differences are also at play:

• Another key marker noted by the FT is Europe’s market structure, which is inherently more complex given the number of countries in Europe and the politics of national pride in maintaining separate listing venues. In Europe, that means 35 listing exchanges, 41 trading exchanges, and 18 central clearing houses — all of which means trading activity takes place in many markets, divvying up liquidity.
• The pandemic saw a surge of Americans sitting at home getting into stock trading for lack of anything better to do with their money. Europeans, who are less bombarded by Robinhood ads, are just… not that into trading stocks. At the end of 2021, 32% of EU household assets were in cash, according to the FT. In the US, that figure was 13%.

Pay That Man His Money: Speaking of widening gaps, the FT separately reported over the weekend that several UK corporate boards are raising CEO pay to keep up with the compensation that US firms are paying, somewhat of an about-face for companies that previously avoided bidding wars. The issue has been recently bubbling up, helped by the high-profile departure of Reckitt Benckiser CEO Laxman Narasimhan, who quadrupled his salary after leaving to take the top job at Starbucks. But they have some serious catching up to do. In America, you try questioning Elon Musk’s $55 billion Tesla pay package, he’ll happily incorporate his companies somewhere else.

Tech is still a boy’s club. Just slightly less so.

While men still dominate the computer programming and related services industry, women have made inroads since the start of the pandemic, according to recently released data from the US Bureau of Labor Statistics. If any newly hired female coders have to return to the office, please be wary of the smell.

Tech-tonic Shift

True gender parity in tech isn’t here yet — or even particularly close. Women accounted for 35% of workers in the field last year, per BLS data, up from 31% in 2019 and good for about 900,000 of the 2.5 million tech jobs in the US. That’s still dismal enough for Karen Blake, co-CEO at the diversity-promoting industry group Tech Talent Charter, to tell the Financial Times this weekend that “the chasm is gigantic,” adding that the made-up ground still “feels a little bit like drops in oceans.”

But pandemic-era forces are still reshaping the industry. Overall industry expansion has played an important role, with the number of tech jobs increasing by 15% between December 2019 and December 2023, per BLS data, or 10 times the rate of increase compared to the overall labor pool. The rise of remote work has played a role, with women more likely to fill jobs that require less in-office time. But even then, tech’s gender gap remains far wider than many job sectors — though the gap is even bigger abroad:

• In the US, women account for almost exactly half of management consulting roles, 55% of financial services roles, and 65% of legal services positions.
• In the European Union, the tech gender gap remains massive. Women accounted for just 25% of tech positions at the end of 2023, according to official EuroStat data, up slightly from 23% in 2019.

AI Initiation: Looming over everything is the gender-agnostic (we think) specter of artificial intelligence. So far at least, coding and software engineering remains one of the most effective use cases of ChatGPT and similar tools — with generative AI proving itself far more adept at coding than it is at, say, writing a script for an unsanctioned Willy Wonka-themed children’s play/interactive experience. The emergence of AI in tech workspaces coincides exactly with an industrywide effort toward cost-cutting, with even more layoffs being announced last week including at Bumble, Sony, and Electronic Arts.

Bed Bath and Beyond may soon have some company in strip-mall heaven.

Arts and crafts retailer Joann Inc, a.k.a. Joann Fabrics, is considering filing for bankruptcy as soon as this week, according to a report from Bloomberg over the weekend.

Threading the Needle

Joann Fabrics is facing the same existential headwinds that have rocked fellow retail giants like Macy’s and the aforementioned Bed Bath and Beyond. The publicly traded chain, which still owns and operates 850 locations across the US, has seen its share price plummet some 85%, closing Friday at about 50 cents.

Last fall, the company laid off workers at its Hudson, Ohio, headquarters, and in December, it raised $34 million in a sale and lease-back of its headquarters. But the moves haven’t been enough to silence lender concerns:

• While discussions are ongoing, Bloomberg reports Joann is likely to file Chapter 11 bankruptcy in a so-called pre-pack filing. The move would give lenders control of the company and allow it to shed some of its debt load.
• The company says it has a long-term debt load of about $1.1 billion. According to data compiled by Bloomberg, its term loan due 2028 is being quoted at less than 10 cents on the dollar.

Mall’s Well That Ends Well: The retail blues are spreading. Last month, Nike announced layoffs totaling 1,600 employees. Meanwhile, Bloomberg also reports that discount home goods store Big Lots is seeking new financing amid dwindling liquidity, while fashion retailer and Bonobos parent company Express is discussing restructuring options with its lenders. It’s almost no wonder that fast-fashion (and fast-everything) seller Temu is making such a push into the US market.