One swallow does not make a Summer

With just one trading session left in the quarter, the German equity market is on track to post its strongest first-quarter performance relative to the S&P 500 since 1960. A clear rotation is underway: investors are moving out of US equities and rediscovering the rest of the world — with Europe, in particular, starting to shine again as a developed market.
The reasons behind this shift are well understood:
1) The US "Magnificent Seven" trade has become increasingly crowded.
2) US exceptionalism is being questioned, especially in the context of a possible Trump 2.0 presidency.
3) Concerns around the US budget and growing debt are gaining attention.
4) On a relative basis, European equities appear attractively valued.
5) Europe is waking up to a new economic and geopolitical reality — one that requires serious investment in infrastructure and defence.
At ECP, we remain cautious. As the saying goes, “One swallow does not make a summer.”
US exceptionalism is far from over. American companies continue to dominate in critical sectors. European equities, while appealing relative to their US counterparts, are not particularly cheap when measured against their own historical valuations. And much of the recent political momentum in Europe still needs to translate into real economic execution — especially if the continent is to regain its competitiveness and productivity.
As always, our focus remains on identifying undervalued businesses on both sides of the Atlantic. Rather than making bold geographic bets, we continue to build diversified, high-conviction portfolios — a strategy that has served us well through volatile times.