Monthly House View - April 2025 - Download here [ENG]

Monthly House View - April 2025 - Download here [CN]

Elections often bring about change, and the year 2024, when countries representing half of the world’s population went to the polls, is likely be remembered for years to come. “There are decades where nothing happens, and weeks where decades happen”. This quote aptly summarises the environment at the beginning of 2025, which witnessed Germany, with its brandnew Chancellor, breaking the debt brake. This is unprecedented since the reunification of Germany following the fall of the Berlin Wall in 1989. German fiscal orthodoxy has been relaxed, and the Maastricht criteria set aside, something Europe has long awaited, and the recent election in the United States has ultimately acted as the catalyst. The unthinkable has finally become possible! 

This marks a clear and radical shift for Europe; Germany’s mega-plan on defence and infrastructure will pull the country out of two consecutive years of recession and is expected to significantly accelerate its growth over the next three to five years.

In the United States, the tariff policy implemented by the Trump administration is likely to cause a pick up in inflation and hamper global growth. Beyond these negative effects, a major upheaval is underway. Starting this year, the growth dynamic between Europe and the United States is expected to reverse: US growth is set to slow down while European growth is set to accelerate. Consequently, the growth rates of the two regions could converge as early as next year. 

During Donald Trump’s first term, investors had relegated his unpredictability to the back seat, largely compensated by tax cuts and deregulation, which promised positive effects on the economy. Today, the situation is radically different. The “Trump Put”¹ seems to have vanished, as the administration focuses on the chaotic implementation of tariffs and federal budget cuts affecting more than 100’000 jobs today. With inflation and purchasing power at the forefront of American concerns, a majority now feels the president is not doing enough. Furthermore, the announcement of mass expulsions of illegal migrants, who are primarily employed in agriculture, hospitality and construction, could exacerbate the labour shortage and worsen inflation. Dissatisfaction is now growing: 52%² of Americans disapprove of Donald Trump’s policies, an increase of 11% in just two months. 

In this edition, we highlight Germany’s comeback by examining the implications of the debt brake removal. The rise in interest rates and the outlook on equities in the Euro Area breathe new life into investors, particularly those who have neglected this region for too long. We are firmly convinced that diversification remains the most effective strategy to navigate this volatile and unpredictable short-term environment.

_{- Trump Put: The perception among investors that President Trump’s economic policies and statements could influence the stock
markets in a way that limits their downside.
2 - Ipsos Poll, 10-11 March 2025.}

Important information

_{Monthly House View, 21.03.2025. - Excerpt of the Editorial}