European stock markets have been crying this year Tariff threat,,,,, Political fluctuations and Economic stagnation – Even if the long-awaited American counterparts’ annual performance is still elusive, strategists have seen a lot of room for improvement.
January, Pan-European Stoxx 600 Index wins the best performance on index S&P 500 In that month of the past decade, it has risen by 6.3%, up from 2.7%. This momentum continued into February, with the 3.3% monthly growth of the STOXX 600 as of February 18 was well above the S&P 500’s 1.25%.
The bullishness across Europe may seem surprising on some levels. US President Donald Trump’s return to the White House is described as Boost our business optimismwhile the largest economy in the euro zone – Germany and France – All are in a dilemma of political instability. US economic growth Still ahead of U.K. and Eurozone.
And, this is not the first year that the European market started the year before stumbled every year (excluding 2022, when the losses were lighter, the Stoxx 600 did not perform better than the S&P 500 decade).
But the United States is working hard now Inflation issues related to tariffsalthough European central banks have largely downplayed the risk of knocking on their own country’s prices. The Bank of England, the European Central Bank and the Swiss National Bank are expected to lower interest rates early this year, and The Fed stepped on the water.
“The market is increasingly concerned about the stagnation of the United States…the U.S. policy uncertainty is perhaps one of the reasons why we should stay away from the diverse needs of the United States,” Gerry Fowler, head of UBS, last week CNBC’s “street sign Europe” was told on UBS’s European stock strategy.
Fowler notes that the U.S. accounts for more than 70% of global stock market capitalization, meaning it doesn’t take a lot of money to move from elsewhere in the U.S. to a “substantial” influence.
He added: “That’s what we’re seeing in Europe. We’ve seen hedging funds, especially buying.”
But Fowler and others have also identified a range of factors supporting Europe, leading UBS to upgrade Europe relative to the United States, “We believe Europe can outperform us in the near future,” UBS Investment Bank said in a report.
‘Enjoy its continuous enjoyment’
Citi strategists said Tuesday that positive revenue revisions are also one of the driving forces behind European stock strength this year.
The European revision trend looks “more impressive than the United States” and “upward revisions are stronger than those predicted by seasonal patterns”, they wrote.
The bank said that when this happened at the same level, European revenue exceeded about 5% on average over the next six months. MSCI Europe’s top UK index Stayed in sync with U.S. stocks during the same period.
“If it continues, the latest (Earnings Revision Index) readings could be the leader in upgrading the actual (EPS) while providing a potential headwind for further European stock market earnings,” the strategist added.
David Groman, a global equity strategist at Citi, told CNBC last month that the bank is still overweight to the United States in its global allocation, but that Europe is “the most popular diversifier in the rest of the world” .
“One of the reasons for this is that we are perhaps surpassing Europe’s lowest peak,” he continued.
UBS’s Gerry Fowler said that if Europe does continue to outperform the market, it will be driven not only by Europe’s rise, but also by the vulnerability of the U.S., especially about 7 stocks.
These seven American tech giants More than half Revenues in the S&P 500 for 2024 Understand stress This year. Automaker Tesla Missed expectations For example, in the fourth quarter, Chip Giant Nvidia is shocked by Chinese AI startup DeepSeek.
“In Europe, there is definitely a lot of motivation and enthusiasm, and I don’t think it’s supported by regional allocators who are large amounts of money, who are usually underweight Europe…usually overweight or at least neutral in the United States,” Fowler added.
Daniel Morris, chief market strategist at BNP Paribas Asset Management, is even more despicable about his recent performance in Europe.
“I think at least European investors may need to enjoy it,” he told CNBC’s “Street Sign Europe.”
And Europe Fourth Quarter Revenue Season Morris said it was a good thing, and in the United States, the positive income surprise was stronger than in Europe.
“So fundamentally, if earnings are what drives the stock market, then you just don’t see the same momentum. If you look at the earnings revisions again, if you do get tariffs, it’s more supportive to the U.S., that’s the U.S. Say it better,” he said, adding that the recent performance may be because European stocks start at lower bases.
“If you look at the economic data released last week, almost all of this data is disappointed in Europe. So even in the market (recently) performance, we are at the turning point.”
– Ganesh Rao of CNBC contributed to this story.
