Barclays has stated that European stocks have been factoring in a potential Donald Trump victory as the US election draws closer.
According to the firm, a group of European exporters, which consists of companies that are particularly vulnerable to tariffs, has performed 15% worse than the Stoxx Europe 600 benchmark since the beginning of spring.
According to Barclays, investors are anticipating the implementation of Trump’s proposed tariff policy, a key aspect of his presidential campaign. This anticipation is leading them to brace themselves before he even wins the election.
Barclays Equity Research
Barclays analysts, led by Emmanuel Cau, expressed their views on the impact of tariff concerns on the EU equities’ relative performance this year. According to them, if a full-blown trade war were to occur, there could be a significant drag on the earnings per share (EPS) growth.
They highlighted that Germany, Italy, and sectors such as Capital Goods, Automobiles, Beverages, Technology, and Chemicals would be the most vulnerable in such a scenario.
Barclays acknowledged that certain European companies have shifted their production to the United States since 2018, potentially mitigating the overall impact of Trump’s trade policy if he is re-elected. Nonetheless, the bank remains concerned about the potential adverse consequences in such a scenario.
According to Barclays, if there is retaliation and a trade war, the second-order impact could be more severe, leading to lower growth and higher inflation, which is commonly referred to as stagflation.
According to the firm’s forecast, the United States would also experience the repercussions of Trump’s tariffs. It is predicted that these tariffs would have a 3.2% negative impact on the S&P 500’s earnings per share in the coming year, particularly affecting industries such as materials, discretionary, industrials, technology, and healthcare. Furthermore, retaliatory measures taken by other countries would lead to an additional 1.5% decrease in forward EPS.
The note indicated that Europe’s markets could experience a rebound in the event of Vice President Kamala Harris’ victory. Furthermore, her policies would provide a boost to the clean and renewable energy sector in the region, which has been performing below expectations in light of the possibility of a Trump win.