Four themes that feed the upper market of European actions

European actions are flirting again with their historical heights. Consequently, seeming to ignore the tense trade negotiations and the opposite winds on the currencies, while volatility has passed out. Consequently, This situation highlights four main themes on which investors are waiting for the next major catalyst.

The Stoxx 600 has achieved its best first quarter against the S&P 500 for ten years, recording an increase of 8.4 % in 2025, slightly higher than the increase of 8.2 % of the S&P 500.

The European Union concluded this weekend a framework agreement with the United States on customs duties of 15 %. Meanwhile, But optimism has already been riding for some time ins the avoidance of a harmful trade war. Nevertheless, and the data show an economy that is good for the moment. Consequently, Investors are interested in four main themes at work four themes feed upper market below the European market of stock market.

1) Domestic values surpass exporters

A performance gap has widened between the domestic values of the euro zone. Meanwhile, the exporters, due to a stronger euro, which appreciated 13.4 % against the dollar in 2025, penalizing the profits of exporters.

Trade -sensitive sectors. Nevertheless, such as automotive and sustainable consumer goods, have lagged behind, while internal market values, such as banks and public services, have jumped.

A basket of Automobiles in the Stoxx earned more than 3 % last week after the announcement of a trade agreement between the United States. For example, Japan, but remains down approximately 1 % in 2025, contrasting with the increase of 35 % of banks and 15 % of public services.

Analysts have revised down the profits forecasts for 2025 in Europe. but a finer analysis reveals a gap between the rate of revisions for the Euro zone four themes feed upper market exporters and domestic values, the benefit by early action of exporters falling more quickly.

JPMorgan’s equity strategists advise their customers to continue to favor domestic values compared to exporters in their outside portfolios. while Barclays believe that the positioning difference is such that the risk of reversal increases.

Helen Jewell. director of investments at BlackRock Fundamental Emea Emea, underlines selective opportunities in the luxury sectors and semiconductors oriented towards export.

“If we obtain a clarification on the level of customs duties. stabilization of the dollar, I think that these values could perform well, which would potentially constitute the second stage of the European cycle,” explains Jewell.

2) Halo effect

The vast spending plans of Germany. intended to relaunch the economy after decades of budgetary rigor, have instilled optimism in European markets as a whole, EU companies to benefit from the increase in expenses in defense and infrastructure.

The announcement of American four themes feed upper market customs duties in April caused a strong fall in the markets. but the German Dax has since rebounded to reach a new annual summit in July. The average values followed the same trajectory. The two indices have increased more than 20 % this year, prefiguring their best annual performance since 2019.

“The importance of Germany as a market for EU countries is considerable. ” said Uwe Hohmann, actions strategist at Metzler Capital Markets, citing the solid commercial relationship of the country with its European neighbors.

According to the European Commission’s spring economic forecasts. the impact of German spending on European growth will be moderate, but the effect on the markets should be deep.

“… Optimism around the German budgetary balance will remain the main engine of European markets in the coming years. ” said Nabil Milali, portfolio manager at Edmond de Rothschild Asset Management, who warns, however, that funds will four themes feed upper market not be injected into the economy before at least 2026.

A possible deterioration of commercial relations with the United States. China could weigh on the morale of European equity markets, at least in the short term.

“Everything would then depend mainly on the German political situation. which, in my opinion, would probably not be enough to support a globally positive trend,” warns Hohmann.

3) Small capitalizations fly the show

For the first time since 2020, the small European capitalizations are about to outperform large capitalizations.

A basket of small European values increased by 13.4 % in 2025, surpassing large capitalizations which display an increase of 9.1 %. Since April. Graham Secker, head of the action strategy at Pictet Wealth Management, explains that the strength of the euro and better economic prospects have brought this reversal.

“The European Small Caps were the very definition of the ‘Value Trap’: they were cheap. but four themes feed upper market the rest until an element changed,” analyzes Secker, adding that in the little liquid segments of the market, it only takes the lines to move.

“The announcement of the German recovery plan has aroused renewed interest in the mid. Small Caps German, which are probably the most direct way of playing the expected budgetary stimulus in Europe,” he adds.

4) Small markets also have their effect

In terms of size. some small European markets have also surpassed the entire stock market landscape this year.

The indices of the Czech, Greece and Poland Republic have gained 25 %, 35 % and 37 % respectively, compared to the 8 % increase in the Stoxx 600.

“I think investors are turning more. more towards these small markets,” observes Nabil Milali from Edmond de Rothschild, stressing that they benefit from sectoral factors and increased exposure to the domestic economy.