S&P 500 Euro-Denominated Performance: Currency Impact and Investment Implications

This analysis examines the S&P 500 denominated in euros (^SPXEUR) based on recent market observations [1]. While the index shows positive returns across multiple timeframes, currency effects have created a significant performance gap between euro-based and dollar-based investors. The euro’s 6.94% appreciation against the dollar over the past 12 months has reduced returns for European investors, making European alternatives more attractive in the short term despite the S&P 500’s superior long-term track record.

The EUR/USD exchange rate dynamics have been the primary driver of performance divergence. As of November 5, 2025, the EUR/USD rate stood at 1.1476 [2], reflecting the euro’s substantial strength. This currency movement has created a approximately 13 percentage point performance gap between the euro-denominated S&P 500 (13.88% 1-year return) and its USD counterpart (27.34% 1-year return) [0][1].

The macroeconomic environment supports this currency dynamic, with European interest rates at 2.15% versus U.S. rates at 4.00%, and European inflation at 2.10% compared to 3.00% in the U.S. [2]. These differentials influence capital flows and currency valuations, directly impacting international investment returns.

• 1-month: 3.07%
• 3-month: 7.98%
• 6-month: 18.55%
• 1-year: 13.88%
• YTD: 4.84%

For euro-based investors, European market alternatives have delivered superior YTD performance:

• STOXX Europe 600: 13.2% YTD return in euros [3]
• EURO STOXX 50: 16.1% YTD return in euros [3]

However, historical data indicates that the S&P 500 maintains superior performance over longer time horizons (5 and 10-year periods) [4], suggesting that currency effects may be more relevant for shorter-term investment decisions.

The analysis reveals that currency exposure can significantly impact investment outcomes, potentially eroding or enhancing equity returns by 5-15% annually. For European investors, unhedged U.S. equity exposure introduces substantial volatility beyond pure equity market risk.

The performance comparison highlights the importance of investment horizon in international investing. While European markets have outperformed YTD, the S&P 500’s historical long-term outperformance suggests that patient investors may benefit from weathering short-term currency fluctuations.

Currency exposure provides diversification benefits but increases overall portfolio volatility. European investors must balance the potential long-term premium of U.S. equities against short-term currency risk and the competitive performance of European alternatives.

• Monetary Policy Divergence
  : Changes in ECB versus Fed policy could significantly impact EUR/USD movements
• Economic Performance Differentials
  : Relative GDP growth expectations will drive currency valuations
• Geopolitical Events
  : European political developments or U.S. policy changes may create currency volatility
• Inflation Trends
  : Diverging inflation paths could affect real returns and currency valuations

• Long-term U.S. Premium
  : Historical data suggests sustained U.S. market outperformance over extended periods
• Currency Hedging Options
  : Availability of currency-hedged ETF products could mitigate currency risk while maintaining U.S. equity exposure
• Strategic Allocation
  : Tactical shifts between European and U.S. markets based on currency expectations

The S&P 500 denominated in euros demonstrates positive returns across all measured periods but underperforms relative to both its USD counterpart and European alternatives in 2025. The 6.94% euro appreciation against the dollar has created a significant headwind for European investors, reducing returns by approximately 13 percentage points over one year.

European investors should consider their investment horizon, risk tolerance, and currency exposure preferences when allocating between U.S. and European equities. While European markets have provided better YTD performance without currency risk, the S&P 500’s superior long-term track record may justify currency exposure for patient investors.

Monitoring monetary policy differentials, economic growth expectations, and inflation trends will be crucial for anticipating future currency movements and their impact on international investment returns.