US markets under pressure, Europe with potential - which factors are decisive now
The authors: DJE's strategy team monitors and evaluates the markets on an ongoing basis using the in-house FMM method according to fundamental, monetary and market-technical criteria.
After the positive start to the year in January, February proved to be more challenging. The global share index MSCI World recorded a fall of 0.47% in EUR terms. The US stock markets were again weaker than the European markets: the S&P 500 fell by 1.09% in EUR terms, while the NASDAQ was under greater pressure with a decline of 2.47%. In Europe, on the other hand, the Stoxx 600 (+3.43 %) and the DAX (+3.77 %) rose. Japan recorded losses, with the Nikkei falling by 3.09% in EUR terms.
At sector level, defensive consumer stocks were in particular demand worldwide, while cyclical consumer and technology stocks came under pressure. In Europe, banks, telecommunications, food and insurance stocks were among the winners, while media, retail and technology stocks in particular were weaker.
Following the recent market correction, we believe a technical recovery is likely. Pessimism has recently increased significantly and several market technical indicators are in buy territory. A stabilization of the markets could be used to rebalance portfolios more defensively. Highly valued stocks with increasing relative weakness should be avoided in particular.
We see the greatest risks in a possible escalation of the tariff and trade dispute and a significant reduction in the US budget deficit. Regionally, we currently prefer European equities to US stocks, while Japan and China continue to offer selective opportunities.
Opportunities that we see
Europe could outperform the US in 2025: the potential for positive surprises ("economic surprise") currently lies in Europe. Asian and American investors continue to show interest, but a neutral position does not yet appear to have been reached. Selected European companies with cost-cutting potential and low customs duties offer opportunities. In the long term, however, the USA is likely to remain the more interesting region due to its structurally higher potential growth.
Germany: Germany's new debt package could have a positive impact on the economy, especially if it is accompanied by structural reforms. Sectors such as construction, defense, chemicals and industry could benefit selectively. In addition, the risk/reward ratio for small and medium-sized companies in Germany has recently improved.
Financials (Europe) / Insurance: The German new debt package has led to a rise in interest rates not only in Germany, but throughout Europe. A higher interest rate level at the long end has a positive effect on European insurance companies. European banks are also benefiting from rising interest rates.
Building/construction sector: The pipeline for infrastructure projects is well filled in both the USA and Europe. Additional impetus could come from new orders for the reconstruction of Ukraine. At the same time, a possible ceasefire or peace could lead to fewer building materials such as cement being exported from Ukraine to Eastern Europe.
Japan: Still selectively interesting with one of the best market risk premiums. Share buybacks are increasing sharply and Japan remains largely unaffected by possible US tariffs. International fund managers have not yet overweighted the Japanese market, which offers further potential. Japanese financials remain attractive.
China: China continues to offer selective opportunities. The real estate market remains challenging, but is showing signs of stabilization. Increased fiscal policy support from the government, which is implementing targeted stimulus measures with record new debt in 2025, is also having a positive effect.
Risks that we are observing
Renewed trade war between the US and China or the US and Europe: An escalation of the trade conflict remains a significant risk. The US tariff policy is causing considerable uncertainty among companies and consumers. Leading indicators such as the ISM Manufacturing PMI have recently fallen significantly, as has US consumer confidence.
US trade policy as a negative factor: The tariff measures planned by the Trump administration could have a delayed negative impact. A new inflationary impulse due to rising import prices could lead to higher interest rates at the long end in the long term.
Rising risk of recession in the US: The probability of a recession has recently increased, but is not yet fully priced in by the market. Fiscal policy cuts and intensifying trade conflicts could prove to be bearish factors for the economy.
Caution with highly valued stocks: Stocks with above-average valuations that also exhibit market weakness should be viewed with caution.
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Marketing advertisement: All information published here is for your information only and does not constitute investment advice or any other recommendation. The statements contained in this document reflect the current assessment of DJE Kapital AG. These may change at any time without prior notice. All statements made have been made with care in accordance with the state of knowledge at the time of preparation. However, no guarantee and no liability can be assumed for the correctness and completeness.