The last quarter of 2024 was marked by a major divergence between the United States and the rest of the world. There was an economic divergence, with strong U.S. growth and overall stagnation elsewhere, particularly in Europe and China. There was also a political divergence, with on the one hand satisfaction over Donald Trump’s decisive victory—seen as “pro-business”—and on the other, significant political uncertainty, especially in Germany and France, the two heavyweights of the eurozone. This divergence resulted in a clear underperformance of European equity markets compared with U.S. markets, as well as in the movement of the EUR/USD exchange rate. The single currency fell from 1.12 to 1.04 dollars over the last quarter of 2024.
Over the first three months of 2025, the situation completely reversed.
Since his inauguration on January 21st, the U.S. president has displayed extraordinary activism, generating significant uncertainty on both the geopolitical and economic fronts.
On the geopolitical front, the current turmoil—particularly Trump’s attitude toward Russia—pushed Germany to abandon the fiscal orthodoxy that had long been one of its strongest economic markers. It approved a massive €1 trillion investment plan dedicated to rearmament and infrastructure. In Germany, the conservative party emerged victorious in the most recent elections, a reassuring outcome for investors. Also on the political front, after months of uncertainty in France, the new prime minister finally succeeded in passing the 2025 budget.
Economically, the sharp increases in U.S. tariffs on the rest of the world have caused major disruptions to global trade, with severely damaging consequences for global growth, particularly in the United States.
In the bond markets, these factors explain the decline in U.S. interest rates over the quarter. The U.S. 10-year yield fell from 4.50% to 4.20%. The downward pressure from a potential recession outweighed the upward pressure on inflation that could result from higher tariffs. In Europe, by contrast, the German fiscal “bazooka” explains the upward movement in European rates. The German 10-year yield jumped by 30 basis points to 2.70% during the period, with a peak near 3%.
This reversal of trend is also visible in the evolution of the euro/dollar exchange rate. Over the quarter, the dollar fell sharply and the single currency climbed from 1.04 to 1.10 dollars.
In the equity markets, the “Trumpian” chaos has naturally been a source of stress and volatility—markets dislike uncertainty, and there is plenty of it!
During the quarter, equities declined overall, but as in the last quarter of 2024 there were major divergences: European markets rose sharply (Eurostoxx50 +9%), while their U.S. counterparts fell heavily (S&P 500 –6%).
We remain cautious in the short term in light of these uncertainties.
Regarding managed portfolios, we carried out the following operations:
For securities accounts and life insurance policies, we increased our gold exposure by purchasing a GOLD ETF. We took advantage of the U.S. market’s downturn to initiate positions in companies such as Google and Microsoft.
As for sales, we took profits on stocks such as EssilorLuxottica, Vinci, and Newmont.
We also conducted tactical operations using ETFs, including buying and later selling the MDAX ETF (German mid-cap index) to benefit from the German plan. We also purchased the Eurostoxx50 and MSCI World ETFs (a global index composed of 70% U.S. equities, including 20% GAFAM).
For PEA-PME accounts, we carried out numerous reallocations. We sold the investment funds we held in favor of Wallix (cybersecurity software), Theon International (defense sector), and Facephi (facial recognition software for secure access), mainly.
For PEA accounts, we reduced our position in the money-market fund we held and took profits on Deutsche Boerse and Essilor. In return, we initiated a position in Teleperformance and purchased the MSCI World ETF.