European stocks are the hottest trade on Wall Street as investors turn away from US 'exceptionalism'

Tue, Mar 11, 2025, 5:10 AM 3 min read

A crisp sell-off successful US stocks this twelvemonth has seen European stocks instrumentality their spot arsenic the hottest commercialized successful planetary markets.

"Prior to the US elections, we assumed that a Trump triumph would reenforce US exceptionalism," HSBC planetary equity strategist Alastair Pinder wrote connected Monday.

"Today, we are upgrading Europe (ex-UK) to overweight (from underweight) and downgrading the US to neutral."

After Monday's marketplace meltdown, the S&P 500 (^GSPC) is down implicit 4% this twelvemonth and 7% from its grounds high, portion the Nasdaq Composite (^IXIC) is disconnected 9% successful 2025 and much than 11% from its latest peak.

Across the pond, France's CAC 40 (^FCHI), Germany's DAX (^GDAXI), and the Euro Stoxx 50 (^STOXX50E) person each gained much than 10% this year. Britain's FTSE 100 (^FTSE), the laggard of the group, is inactive up amended than 5% successful 2025.

"What we underestimated was however the US's wavering enactment for NATO and Ukraine would trigger a watershed infinitesimal for the eurozone — with Germany expected to besides travel done with sizeable fiscal stimulus," Pinder wrote. "It is important to accent that we are not turning antagonistic connected US equities — but tactically, we spot amended opportunities elsewhere for now."

The German DAX touched a grounds precocious earlier this period arsenic Europe's largest system prepares to boost infrastructure and defence spending, portion the Trump medication signals it volition beryllium little expansive successful its subject enactment of its European counterparts.

And Pinder's telephone coincides with a increasing fig of voices connected Wall Street avoiding the "US exceptionalism" playbook and turning to European equities for a triumph against this caller fiscal backdrop.

"The determination alteration is further to our benignant telephone since past summertime that Growth style, US Tech, and Mag-7, are each improbable to enactment this year," JPMorgan caput of planetary and European equity strategy Mislav Matejka wrote successful a enactment connected Monday.

"Less US exceptionalism connected these fronts helps the International/Value trade."

At UBS, strategists besides precocious noted that the standard of a fiscal boost successful Germany could supply a assistance to assurance successful the region, adjacent earlier accrued spending hits the economy.

"The beardown pro-growth awesome from the determination has the imaginable to enactment user and concern sentiment good earlier funds commencement to beryllium deployed," Solita Marcelli, main concern serviceman Americas astatine UBS Financial Services, wrote past week.

However, JPMorgan's Matejka cautioned that "tactically, adjacent term, a batch has repriced precise quickly."