Europe achieves historical highs in its main stock exchanges at a time when uncertainty lingers around the corner. Nothing on the horizon indicated that this moment would arrive precisely now, with the Trump Administration changing the game board. Without the support of Wall Street, it could be concluded that the European market highs in a moment lacking catalysts are not a coincidence. Money is flowing abundantly into the Old Continent, breaking with the past.
So far, 2025 is already the year with the highest influx of new money into European stock markets in the last decade. According to data compiled by Bank of America, fund flows into our continent exceed $110 billion since January 1. This situation has not been seen since 2015, after seven consecutive years of capital outflows from our market, with the exception of 2021, where it was nearly balanced. Meanwhile, investors are clearly moving away from anything denominated in dollars and from U.S. domestic companies, which would fare worse if the hypothesis of an economic recession is confirmed. Small U.S. listed companies have experienced the largest outflow of funds in their history so far this year, with an estimated outflow of around $68 billion.
Is the U.S. completely down and out? No, money continues to flow into its companies. In fact, in recent weeks, investors have regained confidence in large tech companies after the setback at the beginning of Donald Trump's presidency. And what does this mean? Simply that all the money flowing into Europe does not necessarily come from the U.S., but from the rest of the world seeking to diversify their exposure to dollars in other currencies and markets less exposed to the Trump hurricane. "The liberation day [April 2, renamed by the U.S. president] is the final thrust of what has been the deglobalization that began in 2008. The consequences of changing the world's reserve currency paradigm, stability in exchange rates between currencies (...) will lead to capital flows towards Europe or Asia. The world from now on will be much more volatile than what we have seen," says Manuel Mendívil, CIO of Arcano Partners, who sees the current moment as an absolute paradigm shift.
"At the beginning of April, one of the biggest risks was being linked to the U.S.: the dollar fell, while U.S. Treasury yields rose, and the stock market plummeted. Furthermore, foreign investors significantly reduced their purchases, while acquisitions in the rest of the world, especially in Germany, increased," notes Bank of America. The money has mainly flowed into the Frankfurt Stock Exchange in the first weeks after the Trumpist catharsis in early April, but now it is also reaching other countries like Spain and France, and according to analysts, this trend will continue. The agreements reached by the U.S. with China and the UK will not change the trend, they argue, and it remains to "look towards Europe" for a few more months. Why? Germany's fiscal plan approved at the end of March is one of the main reasons. The country will allocate ¤500 billion to modernize its infrastructure and defense, expandable up to ¤800 billion. And it's not just Germany. The rest of the major economies have also announced their intention to increase defense spending, such as Spain, aiming to reach 2% of GDP this year. According to the U.S. investment bank, last week, 9% of all the money that entered Europe went to the German market, with Spain close behind at around 8%, well above the others.
The trend has made a 180-degree turn. According to data collected by BofA, funds focused on European companies have experienced a continuous outflow of money seeking returns elsewhere year after year. Over the past 20 years, there has been a capital outflow of over $698 billion, although there has been investment inflow through ETFs (or newly created exchange-traded funds) with $175 billion in investments.
Just this year, products focusing on Europe have seen money inflows totaling ¤38.4 billion, with one-third (equivalent to $11.46 billion) going to funds domiciled in the U.S. Within Europe, there are also preferences, although gradually, money is increasingly being redirected towards Spain. From mid-April to the first week of May, Germany and Switzerland were the top destinations for major investors, while they sold off holdings in the UK. What did they buy? Mainly large companies and almost nothing from the medium or small sectors, which are more closely tied to the domestic economy. By sectors, industrial, financial, and healthcare companies remain the top preferences. "There are basically three aspects favoring European stocks: first, diversification; second, cheaper valuations; and third, a higher proportion of cyclical companies in Europe," says the Chief Investment Officer of the German asset manager DWS, Vincenzo Vedda.
Yesterday, the Ibex 35 continued its unstoppable rise and this time surpassed 14,300 points. The German Dax Xetra has risen over 20% in 2025 and recently broke the historic mark of 24,000 points in a consistent upward trend in recent days. As money flows into the stock market, it also flows into European debt. The German Bund, one of the global safe havens for money, has seen its yield drop from 2.88% when Donald Trump announced the first tariffs against Canada and Mexico on March 3 (which were never implemented) to the current 2.6% due to recent increases. The U.S. 10-year bond is trading at nearly 4.5%, while the 30-year bond made headlines last Monday by surpassing the symbolic 5% mark for the first time since 2023.
Within the Spanish selective index, there are companies that have nearly doubled their market capitalization. This is the case for Indra, with a 95% increase in value this year. The defense company leads a list dominated by banks. In fact, Banco Santander is the top gainer in the entire EuroStoxx 50, with a 57% increase, followed by Unicredit and BBVA, both above 45%. The banking sector is the most benefited from investor purchases, with an annual increase of over 31%, followed by European insurers at 18% and construction and utilities sectors above 16% in 2025.