central banks, Trump and China are worried

“After a good start in December, stock markets retraced part of their performance for the Eurozone, and even closed slightly lower if we consider the European area. Three reasons explain this reversal of trend: central banks, Donald Trump and China”. He underlines it Gilles Guibout, Head of European Equities at AXA Investment Managers explaining that “ifAlthough the Federal Reserve (Fed) and the European Central Bank (ECB) have continued with their rate cutting cycles, with a 25 basis point reduction in December, the former has taken a much more cautious approach and its members now expect only two further cuts in 2025, compared to the four or five cuts expected just three months ago.

European stocks: central banks are worried

Furthermore, the future President of the United States, Donald Trump, “has once again threatened to introduce significant customs barriers for most of his trading partners, which burden groups heavily dependent on this market. Finally, the China Economic Forum has not announced any significant measures to revive the economy, as was expected, while retail sales in China continue to disappoint and deflation appears to be taking over.

But also Trump

The beginning of 2025 “It will be full of events that could have a significant influence on the performance of stock markets. In fact, it will be necessary to analyze the first measures announced by Donald Trump upon his new inauguration, especially in terms of duties and taxes, but also to understand how the political scenarios in France and Germany are evolving. In the first case, the France finds itself with a Prime Minister in a precarious situation, while in the second, the next German elections could allow the abandonment of the rule of “zero deficit”, leaving a promise important change for what remains the largest European economy”.

and China

As for the European stock markets – explains the expert – “they present very interesting valuation levels, but the expected growth in corporate profits is modest and will largely depend on economic data in the United States and China. Investors’ attention in the coming weeks will remain focused on the Central Banks and on the news that could come from the Trump Administration, in a geopolitical context that remains tense”.

In these conditions “it seems appropriate to maintain good diversification of the portfolio. We therefore remain faithful to our investment strategy by focusing on companies that combine price adjustment capabilities, visibility and growth prospects through exposure to long-term issuesas well as a solid financial structure.”