Schroders Investment: European stock markets are undergoing a significant recovery, with bank stocks being particularly attractive
Schroders Investment pointed out that European stock markets have significantly recovered since 2025, outperforming U.S. stocks by more than 15%. Governments in Europe, including Germany, have committed to bold fiscal measures to boost market performance. Investor confidence in European stock markets has strengthened, especially as bank stocks benefit from rising interest rates. Despite lower valuations compared to the U.S., a breakthrough may be on the horizon. High-yield European stocks are seen as a better investment choice, and investors should focus on growth and income opportunities in Europe
According to the Zhitong Finance APP, Schroders Investment stated that European stock markets are experiencing a significant recovery, outperforming U.S. stocks by more than 15% since 2025, marking the largest gap since 2000. European governments, especially Germany, have committed to bold fiscal measures for defense and infrastructure, coupled with the uncertain political situation in the U.S., which has boosted the performance of European stock markets.
For investors, the most pressing question is whether this upward trend can be sustained. As confidence in the previously undervalued European investment market continues to grow, many are choosing to follow the saying "follow the money." Encouraged by the strengthening euro, there has been a significant increase in investor interest in European stock markets. Although its valuation remains lower than that of the U.S., it feels like a positive shift is beginning to take place.
Looking ahead, 2025 could be a breakthrough year for the European investment market. Bank stocks appear particularly attractive right now. As interest rates rise, banks benefit from improved margins and are actively repurchasing shares to enhance shareholder returns. Additionally, due to increased infrastructure spending, previously overlooked small businesses are also set to thrive, creating substantial growth potential.
Compared to European credit, high-yield European stocks seem to be a better investment choice. While high-yield bonds are popular in 2024, increased government spending may lead to greater market volatility. Although the European Central Bank is expected to provide some support, concerns over fiscal discipline may require long-term government bonds to offer higher yields.
As European governments push for investment, investors are expected to seize these growth and income opportunities. The fear of missing out on the opportunities presented by Europe's rise is indeed present, but the focus should be on the developing and compelling investment prospects in the region. The macro situation of the European stock market is changing, promising to bring irresistible opportunities for those ready to engage actively.
From an interest rate perspective, given the impact of Trump's trade and immigration policies on the U.S. labor market and ongoing fiscal pressures, U.S. interest rates are expected to remain at current levels or rise. Therefore, continued focus on diversifying fixed-income assets, especially in high-quality sectors, is advisable. Preference should be given to Mortgage-backed Securities (MBS) and Australian investment-grade and Insurance-linked Securities (ILS)