Loading…
Loading…
AI-related equity jitters are unlikely to be resolved overnight and eurozone government bonds could actually come out as a winner. Relative to euro rates, US equity volatility is reaching highs similar to previous crisis periods. A global rebalancing of portfolios could see significant demand for euro rates, mitigating the upward rate pressure.
Europe's macro outlook is shifting. After years of fiscal restraint and fragmented policy, the region is entering a new chapter - one centered on pro-growth fiscal policy, energy security, and capital-market reform.
Europe equities and related ETFs are among this year's most obvious rebound stories. And there's widespread belief the asset class's 2025 showings could be repeated or exceeded next year.
European equities have been among the world's best performers this year, and that's saying something, That's because the Trump administration made the European Union (EU) one of its primary tariff targets. As of yet, the U.S. and the EU don't have a firm accord in place.
In recent years, U.S. equities sharply outperformed international benchmarks, giving rise to the term “U.S. exceptionalism.” Indeed, the gaps between domestic stocks and foreign counterparts, including European fare, were exceptional, but that tide is turning to start 2025.
In the early innings of 2025, few asset classes have shined as bright as European stocks and related ETFs. After a multiyear stretch of lagging U.S. equities by wide margins, European stocks are roaring back with a vengeance.
The European Central Bank cut interest rates by 25bps, bringing the deposit rate down to 3.75%. Inflation is expected to come in at 2.5% in 2024, 2.2% in 2025 and 1.9% in 2026.
Declining inflation and slower growth have contributed to the rising potential for rate cuts in Europe. Eurozone core inflation has been coming down more quickly than similar measures in the U.S. and the U.K. If the euro were to weaken and drop through parity, that might give the ECB pause about cutting rates.