Since the beginning of the year, European exporters have underperformed the European market by 15%. Barclays believes that this reflects investors' readiness for the tariff policies that will be implemented after Trump wins the election, and if Harris wins, the European market will rebound
As the U.S. election approaches, the European stock market seems to have already priced in a Trump victory, and the "Trump trade" wind has also blown to Europe...
According to Barclays Bank's analysis, since the beginning of the year, the stock performance of a basket of European exporters (or companies most likely to be affected by tariffs) has lagged behind the benchmark European Stoxx 600 index by 15%, reflecting that investors have prepared for the tariff policies that Trump will implement after winning the election.
On Wednesday, Barclays analyst Emmanuel Cau wrote in the latest report:
"Concerns about tariffs have weighed on the relative performance of the EU stock market. If a full-blown trade war breaks out, we may see earnings per share growth dragged down by high single digits (around 5%-9%), with the greatest risks in Germany, Italy, capital goods, automotive, beverages, technology, and chemicals sectors."
It is worth noting that since 2018, some European companies have already shifted their production lines to the United States. Barclays Bank believes that if Trump is elected, this may to some extent limit the impact of his trade policies on the entire European market, but they still worry about the side effects that may arise. The report points out, "The secondary effects generated by reducing growth and increasing inflation (i.e., stagflation) may be more severe, especially in the case of retaliation and trade wars."
Moreover, it's not just Europe that may be affected, but also the United States. Barclays predicts that Trump's tariffs will drag down earnings per share of the S&P 500 index by 3.2%, with the most severe impact on materials, consumer discretionary, industrial, technology, and healthcare sectors. In addition, retaliatory measures will cause an additional 1.5% hit to forward earnings per share.
The report also suggests that if Vice President Harris wins, the European market will rebound, and her policies will also drive up the clean energy and renewable energy sectors in the region. However, these industries are also performing poorly under the current expectation of a Trump victory