The German opportunity

The younger generation of stock market investors has grown up with the narrative of US exceptionalism. This perception has been reinforced by the strong outperformance of US equities in recent years, largely driven by highly profitable and fast-growing companies—particularly in the Big Tech sector.

However, today’s chart from Carmignac reminds us that this dominance is not a given. Over the past 70 years, the DAX 40 and the S&P 500 have delivered nearly identical average annual returns of about nine percent a year. There were extended periods when German equities significantly outperformed, notably during the Wirtschaftswunder from 1950 to 1970 and again during the post-reunification boom.

With Germany now poised to increase investment in infrastructure and defense, a new phase of outperformance for German companies may be on the horizon. It could be the right moment to revisit the case for German and broader European equities—especially through our European Value Fund.

In conclusion, against the backdrop of growing political, economic, and financial uncertainty in the United States—particularly under a possible Trump 2.0 presidency—diversifying outside US equities may prove to be both timely and prudent.