Meagre economic growth, plenty of unresolved political problems: Europe faces major challenges. Yet many equity markets on the "old continent" fared far better in the first quarter than the US exchanges. A look at how it unfolded - and what it means for your investment strategy.
The DAX up 11 percent and the Stoxx Europe 600 up almost 6 percent - while the US benchmark index, the S&P 500, was down 5 percent: the picture at the end of the first quarter is only a snapshot. But European equity indices having such a clear lead has been extremely rare in recent years. In year-end forecasts, hardly anyone would have dared to predict this outcome.
The US equity markets performed outstandingly over the past two years. Their performance overshadowed that of many other markets. This was explained, among other things, by the fact that the US economy proved far more robust than that of many European countries. And if the forecasts of most economic researchers are to be believed, the US lead remains quite substantial. The OECD, for example, now expects only a meagre 0.4 percent of growth for Germany this year. For the eurozone as a whole, the figure is 1.0 percent - likewise less than expected back in December. While the OECD also lowered its forecast for the US economy slightly, it still expects growth of 2.2 percent there.
Uncertainty in the US
A recent estimate by the Federal Reserve Bank of Atlanta caused quite a stir, however. It is continuously updated based on the latest economic data ("GDPNow"). On 28 March, the model indicated an anticipated contraction of US GDP of 2.8 percent for the first quarter.
Recession fears have long kept flaring up in the US every now and then. After the massive key interest rate hikes, many had long expected a stronger setback. Some economic data, such as consumer confidence, recently pointed to a slowdown. On top of that, the buzzword "Trumpcession" is doing the rounds. US President Donald Trump has, among other things, created a major source of uncertainty with his tariff cudgel - for the economy and markets all over the world.
Shifting towards Europe
According to a Bank of America survey from March, fund managers have in any case shifted capital massively from US equities into European stocks. In Europe, stock market valuations are cheap compared with the US. For some time now, European equities have therefore been credited with catch-up potential.
In addition, Trump's foreign-policy about-face has given the European defence sector an "impulse". The US's defence-policy support for Europe, long regarded as unshakeable, has been called into question. The fact that Germany's debt brake was therefore effectively suspended for defence spending, and that a 500-billion-euro package for infrastructure investment was put together on top of that, also caused a stir on the markets. Stocks such as those of the arms manufacturer Rheinmetall shot up. Meanwhile, long-standing "stock market heroes" from the US tech scene had to take quite a hit.
What does this mean for your investment strategy?
Will the current movement continue, or will it break off again quickly? Which stocks and investment regions will be ahead at the end of the year? Which will be among the long-term winners? You'd love to know that in advance. But no one can look into the future. That's why no one can systematically and consistently outperform the market over the long term by hand-picking individual stocks or timing shifts.
That even the professionals regularly get such attempts wrong was shown again in March by an analysis from S&P Global. It compared the performance of active funds with that of indices. In 2024, among euro-denominated global equity funds, 91 percent of actively managed funds lagged behind the S&P World Index.
Because no one can reliably beat the markets, the most sensible investment strategy is to diversify as broadly as possible. This way, return opportunities and risks can be brought into the best possible balance. quirion's global ETF portfolio is diversified on the basis of scientific criteria. It contains around 8,000 stocks from more than 70 countries. Depending on your individual risk appetite and personal investment horizon, quirion also adds bonds. This can cushion the fluctuations of the equity component.
If you're this broadly positioned, you don't have to let the current shifts among the favourites unsettle you. Instead, you can lean back and relax and make the most of the return opportunities of the world's equity markets without taking unnecessary risks.
More about the global ETF portfolio can be found here.
