Trump's tariffs make "European stocks great again"! $12 billion pours into funds at the fastest pace in over a decade.

With the changing stance of US President Trump on global trade issues affecting market sentiment in the US, the major rotation of European stock markets may be pushed again. Trump's sudden change in import tariff policy has investors optimistic about the smaller than expected impact of tariffs on European companies. Meanwhile, policy chaos has led to a sharp decline in the S&P 500 and the US dollar. At a time when uncertainty about US inflation and economic growth is increasing, Europe's political outlook suddenly seems to be stabilizing. Germany is striving to implement a large stimulus plan, the European continent is united on defense spending, ceasefire in Ukraine is possible, and corporate profits are expected to improve. "We believe that there is further room for European stock markets to rise," said Amelie Derambure, Senior Multi-Asset Portfolio Manager at Amundi SA. "The economic momentum is heading in the right direction. Germany's plans will further strengthen this momentum. Compared to the US stock market, European stock prices are lower and holdings are insufficient." The dominance of the US in global stock markets is weakening As investors abandon the slogan of "buying US economic growth stocks no matter what", the weight of the US in the Bloomberg World Index has dropped from a high of 65% in November to 63%. Year-to-date, the S&P 500 has fallen by about 2%, while the Euro Stoxx 50 index has risen by 12% and the Hang Seng index in China has risen by 19%. The shift in world order has inspired many Wall Street strategists such as Maximilian Uleer of Deutsche Bank to use the phrase "Making Europe Great Again" - a playful reference to Trump's campaign slogan - to suggest that the region's assets are entering a period of excellent performance. According to a report from Bank of America, data from EPFR Global shows that in the four weeks leading up to March 5th, about $12 billion flowed into European stock funds, a rate not seen in nearly a decade. At the same time, emerging markets saw the largest single-week inflow in three months, reaching $2.4 billion. Mark Taylor, Director of Sales Trading at Panmure Liberum, said, "Price trends show that investors are sacrificing US stocks in favor of investing in European and Chinese stocks." Since Trump won a second term as President in November, market confidence in US assets has weakened, especially. Although his protectionist agenda was initially expected to boost local markets, global trading partners responded with threats of retaliatory tariffs. This quarter, the performance of the Stoxx Europe 600 Index has outperformed the US benchmark index by about 11 percentage points - the best relative performance since 2015. Despite the significant increase in investor allocations to European stocks this year, some indicators suggest that there is still room for further growth in European stocks. A survey conducted by Bank of America last month found that only 12% of investors globally consider their allocations to the region's stocks to be too high. Barclays Bank strategist Emmanuel Cau said that the current increase in European stock markets is more like a relief rebound than a long-term return of capital. However, loose fiscal policies in Germany and the EU may attract more strategic capital inflows. "In the end, this may lead to higher economic growth in Europe, prompting investors to strategically rebalance their allocations and drive valuations above average levels," Cau said. "Not many people can do that now because for the past twenty years, US exceptionalism has been the strategy."