Why challenging markets could mean opportunities both in Europe and the UK

We’re currently in a unique, generational period of market volatility, with different dynamics in the US and Europe.

There’s a well-known saying that, if the US sneezes, the rest of the world catches a cold. And the environment we’re in now is, at least in part, influenced by uncertainties brought about by the Trump administration's policies, such as tariffs, global trade conditions and de-globalisation.

At the same time, the €500 billion German fiscal stimulus package focusing on infrastructure, growth and development – what some are calling a ‘fiscal bazooka’¹ – is creating a bifurcation in market trends between the US and Europe. While the markets are usually interlinked directly, the US market's constant focus on the Fed's interest rate changes contrasts heavily with the different dynamics in Europe.

But that’s not all. The unwinding – or de-grossing – of concentrated trades in the US, particularly the ‘Magnificent Seven’ tech names, where money flows from Europe had been directed towards the US, has altered the dynamic too.

Then there is the rise in significant undervaluation of European stocks, with sudden flows and interest in these undervalued stocks in disparate markets with their own issues, fiscal positions and interest rate policy.

Consequently, the market volatility we’re seeing is driven by the confluence of all these factors, leading to rapid moves and swings in both the US and European markets. The dramatic spikes in the VIX (CBOE Volatility Index) in recent weeks are a good measure of how this uncertainty has impacted market volatility.

The increased interest in European markets is evidenced by a 20-year high in European block trades in early 2025, with transactional volumes reaching approximately $8.6 billion – a 70% increase compared to the same period last year according to Bloomberg.² We’re also seeing more opportunities in European markets, particularly in defence and infrastructure sectors.

Identifying investment opportunities.

Understanding the impact of these dynamics is key. We believe that markets where you have a breakdown of correlation, where macro factors are becoming challenging to navigate, are a strong environment for us to operate in. The focus is on detailed research and analytical rigour, looking at positioning, geographic margins and supply chains.

This is where the combined sales and research team of Deutsche Bank and Deutsche Numis can work closely and effectively together to identify investment opportunities and build strong sales partnerships with institutional investors to ‘catch the wave’.

How could this impact UK markets? 

The signs are that the UK government is promoting investment in UK companies, for example, through pension, infrastructure and planning reform. The UK’s proximity to Europe should make it easier to broker a relationship with European markets, and benefit from the same themes as Europe, albeit with a slightly different timeline.

While we are still waiting to feel the full impact of the German fiscal stimulus, it ought to have a positive impact on European markets – which (still) includes the UK.

¹ Fiscal ‘bazooka’ for defence, infrastructure approved by Germany MPs – France 24 (19 March 2025)
² European Block Trades Soaring Even as IPOs Sputter, BofA Says – Bloomberg (25 February 2025)