Hear’s a breakdown of the data presented in the text, organized for clarity:
Overall Sentiment Towards European Stocks:
Positive Outlook: Fund managers are forecasting upside for European stocks over the next 12 months.
Significant Upside Belief: More than 20% believe the upside will be over 10%.
caveat: The survey was completed before President Trump announced 30% tariffs on EU goods.Drivers of european Optimism:
Key Factors: Three-quarters of fund managers believe German fiscal policy, European defense spending, and further regional integration can end Europe’s structural underperformance.
Fiscal easing: Seen as a way to “insulate the region from US headwinds.”
Decoupling from US Headwinds: 63% believe European fiscal spending will be impactful enough to lead European macro and markets to decouple from US policy headwinds (up from 25% the previous month).Investor Views on the US Economy:
Slowing Growth Expected: 63% of surveyed fund managers anticipate economic growth in the United States will slow in the coming months.
Underweight US Equities: 23% of fund managers are underweight US equities.
European Inflation Outlook:
Less Sanguine: Investors are turning less optimistic about European inflation.
Scope for Rise: A net 4% see scope for European inflation to rise over the next twelve months,the highest since March 2022.
Capital Allocation & Sector Preferences:
Leading sectors:
Regional Banking: More than one in five are overweight.
Technology: More than one in five are overweight.
Attractive Banking Sector: More than half of fund managers believe the European banking sector “still looks attractive after the strong rally.”
Other Favored Sectors: Industrial goods and services, insurance, and construction.
Expected Best Performing Sectors:
Industrials: ~33% expect them to be the best performing.
Financials: ~25% expect them to be the best performing.
Small Cap outperformance: 44% expect small cap stocks to outperform European large caps (a significant increase from 7% in June).
Underweight Sectors:
Autos: ~30% are underweight.This sector has been hit by US tariffs.
Retail, Mining, and Media: Also among the least loved sectors.
Country Preferences:
Most Preferred:
Germany: ~40% named it as their preferred equity market.
Italy: Second most preferred.
Least Preferred:
switzerland: Least preferred.
France: Second least preferred.
Underweight Switzerland: ~40% of fund managers polled are underweight Switzerland.
Performance Highlights (Examples):
European Banks: Stoxx 600 Banks index gained almost 30% in the first six months of 2025. German Equities:
DAX index surged almost 22% this year.
Rheinmetall up ~200% year-to-date.
Commerzbank up 84%.
MDAX index up 22% as the beginning of 2025.
german defense players (Renk, Hensoldt, Thyssenkrupp) up significantly (310%, 204%, 182% respectively).
European Autos: Stoxx Europe Automobiles and Parts index fell almost 3% so far this year.
Key Takeaways:
There’s a general optimism about European stocks, driven by expectations of positive fiscal and integration policies, and a belief in decoupling from US economic headwinds.
Banking and technology are the favored sectors, with a strong positive view on the banking sector despite recent gains. Germany is the clear favorite among European equity markets, while Switzerland is the least preferred.
The auto sector is a notable exception, being heavily impacted by US tariffs and consequently underweight by many fund managers.
The survey’s findings predate a significant geopolitical event (US tariffs), which could alter future sentiment.
