Nearly three-quarters (71 per cent) of investment strategists across the Natixis Group and its affiliates believe that Europe will outperform the US in 2025, representing a “significant shift” in sentiment driven by tariff policy in the US.

The insights of market strategists, portfolio managers, research analysts and economists confirmed a bullishness for Europe, with 38 per cent expecting it to be the best performing market in the second half of 2025.

This represents a strong increase compared to the same question last year, when just 3 per cent of strategists chose Europe as the best performing market.

While 88 per cent of respondents felt the tariff threats were here to stay, 56 per cent believed tariff policies were creating the right conditions to spark European growth.

Furthermore, geopolitical tensions and trade uncertainty have driven Europe to look inwards and increase investment in European defence and infrastructure, with 59 per cent of strategists believing defence stocks will benefit from increased spending globally, and this sentiment ran higher with European strategists (77 per cent) compared to the US (48 per cent).

Despite the European optimism, strategists remained wary of several threats to the market outlook over the next six months, with geopolitics (53 per cent), employment (59 per cent), consumer spending (79 per cent), and a trade war (65 per cent) cited as headwinds.

Treasury market turmoil was the top macroeconomic risk, cited by 85 per cent of respondents as a medium or high concern, followed by inflation (79 per cent).

Ongoing market instability also continued to be a concern, with 71 per cent of strategists stating that volatility will remain elevated in equity markets, while 68 per cent felt the same way about bonds.

Despite this, 71 per cent said they were actively finding opportunity in equity market volatility and 74 per cent said the same for bond markets.

Natixis IM found that strategists were looking to bonds in the second half of 2025, with 44 per cent stating they can be used to generate both return and income, but 68 per cent emphasised that active management was key to adding value to bond portfolios.

Looking at the impact of AI on the finance industry, 88 per cent of respondents believed it would unlock new opportunities, 79 per cent felt it would discover risks that were otherwise undetectable, and 79 per cent said it will accelerate day trading.

However, the majority were still wary of AI, as 94 per cent were concerned it would increase the potential for fraud and 71 per cent felt AI investment needed more time to pay off.

Commenting on the report, Natixis IM head of global market strategy, Mabrouk Chetouane, said: “In a year that has seen volatility taken to new levels with geopolitical uncertainty and questions over trade, market strategists are once again seeing genuine opportunity beyond the US.

“Over the second half of the year, strategists will be looking to determine whether European growth will be sustained or if macroeconomic uncertainties and volatility will continue to weigh on markets.

“As heightened volatility persists and tariff threats unravel, investors need to be mindful of where the opportunities are arising, particularly in fixed income, defence and in the tech sector.”

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