Despite all the talking about Europe not growing, having an inflation problem and an asphyxiating regulatory framework, in terms of YTD performance, 2025 is working out pretty well for them so far. While the S&P 500 and Nasdaq are around 2% YTD, while Germany’s DAX is up 10% and the FTSE is up 6%, as you can see on the chart below. While The S&P 500 has an average trailing P/E of roughly 30, the DAX index has a P/E of 15. It’s just one metric, but the gap between both is so big, investors seem to be allocating money to close the gap. Additionally, the ECB is concerned about growth, and has been more aggressive than the FED with rate cuts lately, which have helped european banks. So much so, that they’re beating the Mag7 comfortably YTD. The rotation in 2025 appears to be underway, the January effect points to a fair year, but money is looking for the path of least resistance, and so far, that path leads to Europe.
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