By With the US election less than two weeks away, European stocks have already been pricing in a Donald Trump victory, Barclays said.
The firm said a basket of European exporters — or those companies most vulnerable to tariffs — has underperformed the benchmark Stoxx Europe 600 by 15% since early spring.
Barclays said this reflected investors preemptively bracing for Trump’s proposed tariff policy, which has been a cornerstone of his presidential-election platform, under the expectation he will win.
Barclays Equity Research
“Tariff concerns have been a drag on EU equities’ relative performance year-to-date,” Barclays analysts led by Emmanuel Cau wrote on Wednesday. “In the event of a full-blown trade war, we could see up to a high single-digit drag on EPS growth with Germany, Italy, Cap Goods, Autos, Beverages, Tech, Chemicals most at risk.”
Barclays did note that some European firms had relocated production to the US since 2018, which could somewhat limit the impact of Trump’s trade policy on the whole market if he’s elected. But it’s still worried about the side effects in that case.
“The second-order impact through lower growth and higher inflation (i.e. stagflation) could be more severe, in particular in the case of retaliation and a trade war,” Barclays wrote.
The US would also feel the impact. The firm forecast Trump tariffs would be a 3.2% drag on S&P 500’s earnings per share next year, with the most negative impact on materials, discretionary, industrials, technology, and healthcare. Beyond that, retaliatory measures would generate an additional 1.5% hit to forward EPS.
The note suggested a rebound for Europe’s markets if Vice President Kamala Harris won. Her policy would also boost clean and renewables in the region, which have also underperformed on the chances of a Trump win.
