Investment specialists remain optimistic about purchasing European stocks, regardless of ongoing tariffs.
In the ever-evolving world of investments, European equities are making a strong case for consideration in 2025. The securitization market in Europe is expanding, facilitating lending and investment, and setting the stage for potential growth.
According to Janus Henderson Investors, European policymakers are adopting a more pro-business posture, removing unnecessary bureaucracy and regulations. Initiatives like the Savings and Investments Union aim to channel household savings into investment products that benefit European companies. These factors, collectively, could boost European GDP by around 20%, according to Robert Schramm-Fuchs of Janus Henderson Investors.
European equities attracted over $100 billion in inflows in the first half of 2025, tripling the previous year's levels. Investors are reallocating capital away from the volatile U.S. market into Europe’s more stable and sustainability-focused infrastructure deals.
However, the landscape is not without complications. The Trump administration announced a 30% tariff on EU goods, effective August 1, 2025, which poses near-term risks tied to trade negotiations. Despite this, experts remain optimistic that sectors less reliant on exports, such as domestic-focused banking, aerospace, defense, and certain cyclical industries, will outperform.
Investors are adopting more data-driven and dynamic strategies, using real-time economic indicators to adjust exposure in anticipation of shifting economic regimes. The emphasis on European infrastructure, supported by public-private partnerships and sustainability initiatives, is seen as a vital theme offering attractive risk-adjusted returns and contributing to the so-called "infrastructure supercycle."
For those with a moderate to aggressive risk tolerance, European equities may warrant a significant reallocation in portfolios, offering the potential for higher returns and diversification benefits. However, it's important to note that foreign jurisdictions generally do not recognize the tax-deferred nature of 401(k) plans and IRAs. As a result, foreign taxes are automatically withheld on dividend payments, and there is no relief for U.S. investors.
When making these investments in a taxable account, individuals can claim the foreign tax credit. In many cases, employer-sponsored retirement plan participants can access a broadly diversified basket of non-U.S. investments in a single mutual fund.
In conclusion, the current European equity investment approach balances optimism about supportive fiscal and policy developments and infrastructure growth with caution about trade war impacts and global economic slowdown risks. The sectors favored emphasize domestic revenue exposure and those positioned to benefit from policy-driven growth and sustainability trends. These strategies reflect a tactical shift from U.S. equities towards Europe in response to geopolitical and economic realignments in 2025.
Personal-finance decisions might involve considering investments in European equities, as they are attracting substantial inflows and offer potential for higher returns and diversification benefits. This trend could be driven by the pro-business posture of European policymakers and the expansion of the securitization market, as well as initiatives like the Savings and Investments Union that aim to channel household savings into investment products. However, it's crucial to account for the potential impact of tariffs and taxes when making such investments, particularly in a taxable account.
