American actions collapsed to the outperformance of Europe, and Powell has slipped into this dominant signal
After President Donald Trump shocked the world markets with his aggressive prices earlier this year, investors have turned away from the United States and went elsewhere – but the scales are back.
American actions have made furious rebounds, establishing new record heights and eroding outperformance that European markets have appreciated for a large part of this year.
The S&P 500 is now up 13% per day and the NASDAQ increased by 17%. More recently at the end of June, when the large market index had resumed its top of all time, both increased by 5%.
At the same time, the Dax stock market index in Germany has increased by 19% so far this year, compared to 20% in June. Other gauges have gained ground, but not as much as American actions. The FTSE 100 in the United Kingdom increased by 13% against 8% in June. And the MSCI Europe stock market index jumped 25% for the year, compared to 21%.
(China is another story.
The feeling has moved considerably to Europe. Investors become more nervous about the prospects for deficit in the United Kingdom and France, while economic growth remains moderate. And the hopes of an explosion of public spending and deregulation have failed to materialize so far.
“Apart from Germany, investors seem frustrated by the lack of progress: there is no sign that the German government is running on the spending machine,” analysts of Deutsche Bank said on Wednesday in a note. “This has fueled the concerns that the government is dragging its feet, and perhaps hesitating in its commitment, implementing the promised defense and infrastructure expenses.”
Although they still see one “rush to the sugar” to come, they are less optimistic about the long -term growth implications.
On the other hand, the American markets were turbocharged by the continuation of the AI ​​revolution, moderation in the Trump trade war, the robust benefits of companies, the continuous growth of GDP, resilience between consumers, tax reductions and the yield of the federal reserve to relaxation.
American actions should obtain another elevator from the central bank and potentially fill the gap even more with Europe.
On Wednesday, the Fed lowered the prices for the first time since December, although many Wall Street read a bellicist message at the press conference of President Jerome Powell.
In particular, he described this decision as a “risk management cut”, suggesting that it was not the start of an aggressive relaxation cycle. He also warned that there are no risk -free options and that it is not easy what will happen in the future.
But the economists of Citi Research did not agree with the interpretation of the market that Powell was a fellowship and rather read a more dominant message.
“Powell later said that today’s efficiency of the cup of today came from the effects of a rate drop of 25 bp, but from market pricing in additional cuts – suggesting that in their basic case, Fed officials will follow the markets on Wednesday and the reduction of the land and the reduction of 75 bp this year,” said Citi in a note on Wednesday.
Meanwhile, JPMorgan’s stock strategists stressed Thursday that the S&P 500 had earned an average of 26.5% during the second year of a relaxation cycle, assuming no recession, compared to a gain of 13.7% the first year.
The Fed started its rate decreases last September, and the market has already outperformed its typical first -year gain by climbing 17.6% during this period, JPMorgan added.
“The rate reductions have historically provided significant support to profits with an elevator in consumer spending, investment expenses (CAPEX and R&D), mergers and acquisitions and buyouts,” said strategists.
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