Shifting growth expectations between the US and Europe reinforced the value of broad diversification across regions and asset classes.
Equity markets are presently reflecting shifting growth expectations between the US and Europe. In the US, ongoing trade tensions and policy uncertainty (including new tariffs) have started to weigh on growth prospects. By contrast, Europe’s outlook has brightened thanks to potential fiscal stimulus – notably Germany’s plan for major defence and infrastructure spending – which is boosting optimism about growth on the continent. It is worth noting, however, that this optimism for Europe comes with a caveat as the dust is yet to settle on the full potential for specific US tariffs aimed at European exports. In other words, while Europe’s “animal spirits” are stirring hopes of fiscal expansion, the spectre of new US trade barriers means we retain some caution on European exposure in the near term.
