Europe’s financial markets, which have long been slow, are being awakened while Donald Trump’s attempt to reformulate global trade and safety undermine the dominance of the United States, which lasts decades. In all kinds of assets, the old continent is collectively surpassing America in a way that has rarely seen before. The euro is stronger than in the last three years. The German titles last week surpassed the Treasuries on the largest margin ever recorded. And while European actions were affected by the trade war, they are proving much more resilient than American.
The change from just six months ago is remarkable. European markets at the end of 2024 seemed to remain forever in the shadow of the US and its Trump -powered exceptionalism. All people wanted to discuss was the hot AI AI actions, the upward dollar, and an imminent wave of tax cuts and deregulation that would make America big again. “There is this feeling that Europe is just a museum; well, the museum is now giving life,” said Catherine Braganza, who has bought high European high -performance titles for the background investment in London.
The shock came from several directions at the same time. The intermittent tariffs of the US President and the planned fiscal policy forced investors to wonder if Treasuries and the dollar will still be the safe haven that have been for decades. Germany promised hundreds of billions of euros in defense and infrastructure spending after Trump made it clear that the US would no longer serve as the main European security guarantee.
All of this suggests that time ended for the era when America, in the center of financial markets and global commerce, absorbed trillions of dollars from the rest of the world. Investors are now looking for alternative places to put their money in a direct repudiation of Trump’s policies and their unpredictable style of rule. Some of the biggest finance names are positioning themselves for more gains in Europe. Vanguard International favors short -term securities in the euro area, with the Central Bank free to cut interest rates. Goldman Sachs Group Inc. predicts that the euro rises to $ 1.20 as the dollar appeal decreases. Blessed Manthey of Citigroup Inc., who in October predicted the rise in Europe, downgraded this week the US actions for neutrals, maintaining his positive perspective on Europe.
Certainly, the perspective for Europe itself has become more complicated. Trump’s rates burst the optimism that greeted Germany’s decision last month of starting a wave of spending, a vital impulse for lasting growth throughout the block. And a possible recession in the US would pull other economies down along with it – including the European Union, making currency and risky assets difficult. But European markets still have much in their favor, a sign that a long -term capital rotation for the region may just be starting.
For the central politicians and bankers of the continent, the disintegration of American exceptionalism is a primary opportunity for the euro to advance as a reserve currency, undermining the longtime hegemony of the dollar.
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The dollar-typically an asset of refuge in times of turbulence in the market-fell to a new minimum of six months on Monday, as the latest oscillation of Trump administration on tariff policy increased investors’ restlessness over US assets. German titles, or Bundes, have been shown to be a safe place in the midst of the turmoil. While the income of US 10 -year titles climbed half a percentage point in just five days, Germany’s equivalent performance resisted being pulled up. Although Treasuries stabilized this week, price fluctuations were severe enough to leave market participants attentive to an intervention of the Federal Reserve. And where a possible explosion of inflation threatens to limit the Fed’s ability to cut interest rates, the European Central Bank has a clearer way to do so. Monetary markets are confident that a quarter-point reduction is on its way on Thursday, with at least two more movements by the end of the year.
“Today we prefer to be in bunds,” said Nicolas Julien, a global fixed income chief in investment manager Candiria, commenting on the company’s favorite refuge assets. While Germany is about to increase securities sales, “the debt level is very low and I think it should exceed the risk -over market compared to Treasuries.”
There is also a growing perception, based on the cohesive response of the EU to the pandemic in 2020, that the bloc is stronger than it was before, which helped limit the increase in income from indebted countries such as Italy in recent volatility. The EU is “more resilient than in the past and this should also be good for investment flows, at least in relative terms,” said Vasileios Gkionakis, senior economist and strategist of Aviva Investors. European actions are also attracting investors that escape the volatility that has convulsed US markets. Research with global background managers from Bank of America Corp. This week he found a record number of respondents who intend to reduce exposure to US stocks.
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The S&P 500 is down 7.9% this year, including dividends, compared to a 10% return in terms of dollar to the Stoxx Europe 600 index. However, judging the price-rank indices, European shares still look like a bargain: they are almost 30% cheaper than those of the US, much wider than the 17% discount of the last twenty years. Amundi Sandi, Europe’s largest asset manager, is among those that favor European actions, with a preference for defensive, quality and value actions. Investment Director Vincent Mortier states that the continent is well positioned to capture flows as the global commercial system is restructured. “Moments like this happen only once every 100 or 200 years,” he said in an interview. “Europe is back on the map.”
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