According to Andrew Rymer, Schroders’ chief investment officer, the chances of European stocks performing better than their US counterparts are at “the highest level in quite some time.”
Last month, the EU outperformed US stocks which were plagued by concerns about high valuations and political risk.
In February, the Stoxx 600 rose 3.3% and S&P500 fell 1.4%.
There’s also reason to think that US stock prices will remain behind those of Europe for the rest of this year.
European Stocks Offer Relief from Tariff Uncertainty
Naeem Alam, of Zaye Capital Markets says that investors may continue to be interested in European shares over the coming quarters because the region provides a sense of relief from tariff uncertainty.
The President Trump announced that he would impose a 25 percent tariff on all imports coming from the European Union. He added the taxes will be applied to cars and other goods.
Naeem said in an interview today with CNBC that investors may prefer European stock against this backdrop because “we know what to expect”. This makes it easier for them to prepare themselves for the future.
The new tariffs, and the potential trade war that they could trigger in the future will also be a significant headwind to the US stock market as of 2025.
European stocks are more affordable.
Aslam believes that the United States will underperform European stocks this year, mainly because of the attractive valuations attached to them.
In an interview with CNBC, he said that the price-to-earnings ratio in Europe will be 40% by late 2024.
On the other side of the Atlantic, the valuations are alarmingly high due to the continued growth in artificial intelligence.
The experts at Zaye Capital say that while US technology firms are growing rapidly in the AI frenzy due to DeepSeek, a possible slowdown is brewing. This makes Europe an “excellent place” to be.
Lower interest rates could be beneficial to European stock markets
The Federal Reserve has not cut rates since 2025, according to recent data.
Dan Boardman Weston, of Bri Wealth management, says that in comparison “there is a clear pathway for monetary policies easing” which will be a significant tailwind this year for regional equity markets.
The European Commission announced plans to mobilize more than $8 billion in order to boost the defense budget of the EU amid geopolitical tensions.
This could help to drive up the prices of European Defense Stocks in 2025.
According to Schroder’s Andrew Rymer, European stocks are well positioned to perform better than the US because they have “encouraging earnings prospects” and benefit from a surge in share buybacks. They also trade at lower valuations.
This article Why European Stocks are Set to Outperform US Markets in 2025 first appeared on The ICD
