European investment experts remain optimistic about stocks, even with ongoing tariffs in the continent
In recent times, European equities have been the subject of increasing interest, with Janus Henderson Investors portfolio manager Robert Schramm-Fuchs presenting a bullish thesis on the region. This optimistic view is backed by several recent developments in Europe.
One of the key factors driving this optimism is the adoption of a more pro-business approach by European policymakers. This shift aims to remove unnecessary bureaucracy and regulations, fostering an environment conducive to growth and investment.
Another significant factor is the emergence of a burgeoning securitization market in Europe. This market is expected to facilitate lending and investment, further boosting the economic growth of the region.
The launch of the Savings and Investments Union initiative is another noteworthy development. This initiative aims to channel European household savings into investment products that benefit European companies, potentially providing a significant boost to the region's economy.
Schramm-Fuchs projects that these factors could collectively increase European GDP by over 20%, underpinning a positive outlook for equities despite potential risks such as U.S.-EU trade tensions and a global economic slowdown.
In terms of specific sectors, Schramm-Fuchs and his team find particular opportunity in banking, defense, and select cyclical sectors. They believe the upside prospects outweigh the near-term uncertainties.
For individual investors, it's worth considering investing in European equities outside of a retirement plan. In many cases, a broadly diversified basket of non-U.S. investments can be accessed in a single mutual fund. Foreign taxes are automatically withheld on dividend payments in most employer-sponsored retirement plans, but a tax credit is available when investments are held in a taxable account.
Adam Hetts suggests that a quarter to a third of an individual's equity allocation could be directed overseas. For a 60/40 investor, this would mean a 15% to 20% international equity allocation.
Notably, Germany's fiscal stimulus policy includes an infrastructure investment package, further bolstering the bullish case for European equities.
In the first half of 2025, the MSCI Europe Index had a strong performance, with a 23.9% return. Compared to the U.S., the MSCI ACWI (All Country World Index) has a U.S. contribution of roughly 63%, leaving room for international equities to warrant a large reallocation in portfolios.
As a starting point, investors should look carefully at their employer-sponsored retirement plan options. However, for those seeking to invest in European equities, considering a brokerage account outside of the plan could potentially offer greater opportunities.
[1] Source: Janus Henderson Investors, as reported in various financial media outlets.
- The pro-business approach adopted by European policymakers, aiming to remove bureaucracy and foster an investment-friendly environment, could potentially boost investments in DEFI (Decentralized Finance) and other business sectors in Europe.
- The emergence of a securitization market in Europe is expected to facilitate lending and investment, which might create opportunities in the growing DeFi sector.
- The Savings and Investments Union initiative could provide personal-finance benefits, as it aims to route European household savings into investment products that may indirectly support DeFi investments.
- As the bullish outlook for European equities continues, investing in select cyclical sectors such as banking, defense, and possibly DeFi might present attractive opportunities for both businesses and personal finance.
