The European stock markets are showing a positive trend despite geopolitical tensions, underscoring their resilience against such risks. This stability is remarkable, especially given the current escalation in the Middle East. Here are some factors contributing to the strength of European markets:
Economic Factors
Economic Growth: Europe is expected to achieve growth of around 1.1% in 2025, which, although below US growth, still represents an acceleration. This moderate growth rate could attract investors looking for stable markets.
Investment Rotation: There is a growing tendency to invest in European stocks instead of US stocks. This rotation is driven by factors such as German economic programs and increased defense spending in Europe. European stocks are considered cheaper compared to US stocks, making them more attractive.
Market Performance
Stock Market Performance: The Morningstar Europe Index increased by 11.5% in the first half of 2025, while the Morningstar US Market Index lost 6.9%. This development shows that European markets are performing strongly compared to the USA.
Forecasts for 2025: Some analysts expect the Euro Stoxx 600 to significantly outperform the S&P 500 in 2025. These forecasts are based on improved economic prospects in Europe.
Geopolitical and Market Conditions
Geopolitical Risks: Despite the current geopolitical tensions, European markets are showing resilience. However, investors should remain vigilant as geopolitical risks can lead to greater losses at any time.
Interest Rate Environment: The rise in long-term interest rates in the USA and worldwide could normally put pressure on riskier assets. However, so far, the markets appear unaffected by these developments.
Overall, European stock markets benefit from a combination of economic factors, investment rotations, and strong market performance. Despite geopolitical tensions, it remains important for investors to be aware of potential risks.