European markets underperforming U.S. markets may offer recovery trade opportunities, potentially positive.

From Investing.com: 2024-12-16 00:05:45

Europe is facing a tough year ahead with financial markets suffering due to U.S. tariff fears and political turmoil in France and Germany. Despite this, some investors believe peak pessimism has been reached and are looking for bargains as European stocks underperform the U.S. by the most in 25 years.

European stocks have slumped with the euro down over 5% against the dollar. However, as assets become cheaper, investors are seeing opportunities for growth and believe Europe could surprise underexposed investors. Some forecasters predict sustained bad news could push the euro below $1.

Amid weak euro zone productivity and downgraded growth forecasts, European investors are starting to warm up to beaten-down French and German stocks. Euro zone economic trends remain poor, but signs of market pricing extremes have emerged with German stocks soaring, showing optimism among traders.

Bank of America strategist Michael Hartnett has warned of a potential U.S. stock market bubble, predicting a major correction in the first half of 2025. He expects U.S. tariffs to drive inflation and interest rates higher, leading investors to seek cheaper international alternatives, potentially benefiting European companies.



Read more at Investing.com: Laggard European markets may be 2025’s top recovery trade By Reuters