HSBC: European assets will benefit from the European Central Bank's proactive policies.

Hussain Mehdi, an analyst at HSBC Asset Management, stated that the current market pricing shows a significant gap between the expectations of interest rate cuts by the European Central Bank and the Federal Reserve in 2025. In short, the Fed remains constrained by inflation pressures despite supply shocks caused by high tariffs and the impact of a weakening dollar. We believe this will keep U.S. yields sticky and increase volatility in the U.S. stock market. On the other hand, European assets are expected to benefit from the proactive actions of the European Central Bank, particularly as Germany undergoes its largest shift in fiscal policy stance in a generation, potentially promoting structural growth. We believe that in the long term, these "policy put options" could provide a strong catalyst for unlocking value in many European stock markets. For multi-asset investors looking to protect their portfolios from downside risk, German government bonds also appear to be an attractive option, while the safe haven properties of U.S. Treasuries are increasingly being questioned.