The Return of European Stocks
European stocks are experiencing an impressive comeback in 2025, driven by geopolitical and economic policy developments. Germany plays a central role by responding to global tensions with measures to stimulate the economy, ranging from a shift away from austerity programs to investments in infrastructure and defense. These measures could promote GDP and earnings growth in the medium term, particularly benefiting the industrial, raw materials, and infrastructure sectors.
Strength of the DAX and Italy’s FTSE MIB
The German benchmark index DAX greatly benefits from this development, led by large companies such as SAP, Siemens, and Allianz. With about 70% of revenue generated outside of the Eurozone, the DAX has a broad international presence. The FTSE MIB index in Italy is also gaining momentum, with approximately 45% of revenue generated domestically. The strong weighting of banks and attractive valuations create additional potential.
Investment Opportunities for Investors
Both private and institutional investors have channeled about €49 billion into European stocks by May 2025, reaffirming confidence in the region. For investors, ETFs on European indices, such as the Stoxx Europe 600 or the MSCI Europe, are suitable for capitalizing on the upswing. These ETFs encompass significant positions from various European countries, including non-Eurozone states such as the UK. Given a valuation discount of about 30% compared to the US market, such investments present an attractive foundation.
Recommendations and Conclusion
- Stoxx Europe 600 ETF: Broad diversification across countries
- MSCI Europe ETF: Valuation discount compared to the USA
- DAX ETF: Focus on internationally oriented German blue chips
Overall, the comeback of European stocks presents opportunities for profitable investments, especially in the industrial, raw materials, and infrastructure sectors, as well as in country indices such as Germany and Italy.