Trump Is Making Europe’s Market Great Again: 5 Stocks to Buy

European stocks have emerged as a surprising outperformer this year, dramatically overtaking the S&P 500 in a fashion that’s caught many investors off guard. In 2025, the STOXX Europe 600 has surged by 8%, while the S&P 500 has declined by 3%, marking the biggest disparity in over two decades. This shift is fueled by a series of geopolitical and economic events tied to the Trump administration’s new foreign policy direction, which is notably shaking up existing U.S. alliances and impacting economic perceptions in Europe.

The New Dynamic in Europe

For years, Europe has been viewed as a laggard in the global economic race, largely due to the enduring issues like the Ukraine war and sluggish economic growth. However, recent political maneuvers suggest a notable transformation. Investors are sensing opportunities in a region they have largely neglected. The focus now is on an economic rebound driven by significant increases in fiscal spending. For example, Germany has recently eased its “debt brake” policy established post-global financial crisis and has passed a comprehensive €1 trillion ($1.08 trillion) package for infrastructure and military upgrades.

Tariff Threats and Market Reactions

Make no mistake—the path to growth isn’t smooth. The potential for aggressive tariff implementations by the Trump administration poses an immediate concern. While some traders view these measures as obstacles, others see pullback opportunities, particularly as the STOXX Europe 600 is currently trading at a compelling 14.6 times projected 2025 earnings, significantly lower than the S&P 500’s 21 times earnings. This valuation gap is inviting renewed investor interest in European assets, with many considering this a signal to buy into an underowned region on the cusp of change.

Macro Outlook: A Glimpse of Growth

Looking ahead, Deutsche Bank’s strategists forecast a GDP growth acceleration for Germany to 1.5% in the coming year. Enhanced public spending and the European Central Bank’s monetary policy—which has cut interest rates by 1.5%—are already providing the fuel for improvements in bank lending and increased activity in manufacturing sectors. These positive trends suggest a larger recovery that may align with a pathological shift in focus from the U.S. market to Europe.

Stock Picks to Consider

Here are five stocks that savvy investors should keep an eye on as Europe’s markets evolve:

1. Kemira

This Finnish water chemical company boasts a pristine balance sheet and a cost advantage against European competitors. With a pricing strategy aligned for improvement as industry dynamics shift, Kemira stands to benefit significantly from increased fiscal spending in construction sectors.

2. Arkema

French chemical maker Arkema is firmly positioned to capitalize on fiscal spending initiatives as it supplies to construction companies. Its robust growth metrics are bolstered by strategic acquisitions that enhance its competitive positioning amid rising industry recoveries.

3. Porsche

Though the automotive industry may face tariff scrutiny, Porsche continues to attract high-end consumers undeterred by price fluctuations. At 14.5 times earnings, it remains a reasonable choice compared to mass-market brands that might bear the brunt of tariffs.

4. British American Tobacco (BAT)

BAT offers a compelling entry point with its 7.5% dividend yield and currently trades at just 8.8 times earnings, a stark contrast to its U.S. competitors. Its slow transition to non-combustible tobacco could also pay dividends as market dynamics evolve.

5. Groupe Bruxelles Lambert

This Belgian conglomerate trades at a 40% discount to its estimated sum of parts, offers an attractive dividend yield of 7%, and holds stakes in high-performing sectors like spirits and testing. For growth-oriented investors, this represents an often-overlooked opportunity.

Market Dynamics and Strategy

The market dynamics in Europe are not just a function of external threats but also of significant internal reforms and fiscal re-commitment. The collective push towards an investment-friendly environment and diminished risks seems set to unfold. As noted by geomacro strategist Marko Papic, the overstated fears regarding Russian aggression and U.S. abandonment are paradoxically leading to robust reforms in Europe, positioning the continent as a fertile ground for investment.

In summary, the current climate creates a unique opportunity for traders and investors looking to diversify and capture growth in an emerging European market landscape. Be selective, stay sharp, and watch for pullbacks as potential buying opportunities. Europe is back on the trading map, and it’s time to seize this moment.