- With a trade deal between the United States and the European Union in place, the market rally seems justified, ending the debate over investor confidence. Tariffs will have a damaging long-term effect, but their impact is expected to diminish over time.
- Companies and investors are in a better position now than in April when tariffs were first announced. Supply chains are being adjusted, and firms are strategizing for the short and medium terms. The long-term effects of tariffs are expected to lessen naturally.
- European markets have rallied ahead of the tariff deal, with the question of a potential correction looming. The European equity market is not overvalued and offers a 5% discount to fair value estimates compared to global and US markets.
- European earnings season shows mixed results with sectors like consumer discretionary and staples giving contradictory signs of economic health. Companies like Ryanair report strong bookings, while Nestle sees anemic volume growth as consumers seek budget options amidst higher costs. Tariffs are impacting firms, especially in the automotive industry.
Read more at Morningstar: What’s Next for European Stocks?