Dr Ovidiu Tierean is a senior advisor at PKF Malta
At the inauguration speech, President Donald Trump has promised a “golden age” for America. But this is yet to materialise.
After winning a new term in the White House, he claimed to restore wealth to Americans, and investors started the year optimistic about the prospects of a Trump administration that is friendly to business and the crypto sector. But even though it has been just over a month since Trump was inaugurated, investors are no longer so confident.
American stock markets have fallen in the past three weeks, unlike those in Europe and China, which are up. Stock markets in the United States have risen strongly since Trump’s re-election in November 2024. After taking office on 20 January, the major stock market indices showed a fresh record high on 19 February, but since have plummeted. The S&P 500 index, which tracks the performance of the 500 largest listed companies in the United States, has fallen 2.2% since 17 January, the last trading session before Trump returned to the White House. The index is also below its level at the end of last year. The Dow Jones Industrial Average is 0.5% below its 17 January high, while the Nasdaq Composite, which mainly includes technology companies, has lost 5.5%.
In contrast to US markets, European stock markets have risen over the same period. The STOXX Europe 600 index, which tracks the performance of 600 companies in 17 European countries, rose 0.7%. The indices of the largest European markets have fared much better. The FTSE 100, the London Stock Exchange index, rose 3%, and the Frankfurt Stock Exchange’s DAX, 6.7%, while the main Paris Stock Exchange index rose 4.4%. All three indexes showed record highs as early as this week.
Analysts say the performance of US stock markets has been influenced by uncertainties about the US president’s policies. Although Trump said he would act from day one to reduce bureaucracy, lower taxes and reduce inflation, the results are so far uncertain. Trump’s promised deregulation should have helped businesses, but that has not happened yet. In addition, it is overshadowed by the chaos created by Elon Musk throughout the federal administration with his Department of Government Efficiency (DOGE) spending reduction committee. As for the promised tax cuts, they are blocked by divisions among Republicans in Congress.
Also, threats of increased customs duties on goods imported from the US’ main trading partners are creating uncertainties among companies, which fear a disruption in production chains. Although Trump has only imposed 10% tariffs on China so far, the US president has promised that 25% tariffs on Canada and Mexico will take effect after the month-long suspension and has threatened to impose a 25% tax on all goods imported from the EU and an additional 10% tariff on China. Whether or not they are ultimately implemented, these threats are creating fears among Americans that prices will rise again. This at a time when the US economy is still struggling with inflation. In January, the annual inflation rate rose to 3%, and consumers expect the advance to continue this year.
At the same time, the stock markets were also affected by the yearly financial results and forecasts of the companies, which, except for the banking sector, were mixed. The results of the seven technology giants did not impress, and the companies announced that they need to invest even more in artificial intelligence, without having a timetable for when these investments will turn into profits. In addition, the sudden emergence of the Chinese start-up DeepSeek turned the AI sector upside down, after suggesting that this technology would require fewer chips and less energy than previously thought.
European stock markets, on the other hand, are enjoying their best start to the year since the late 1980s. The development comes after a prolonged period in which European markets performed worse than those of the US stock markets and despite political instability and stagnation in the largest economies on the continent. Analysts say the unexpected performance was driven by Trump’s decision not to immediately raise tariffs on EU imports. Investors had expected the bloc to be the main target of Trump’s “America First” trade policies, after the President repeatedly threatened and pledged to impose tariffs, but so far, they have not come into effect.
Also important were the prospects for stronger economic growth in France this year, which finally adopted the 2025 Budget, as well as a possible relaxation of borrowing limits in Germany, which would allow for increased investment, after last week’s elections were won by the centre-right party. European stock markets also benefited from the potential ceasefire in Ukraine, which would be possible this year. A possible peace agreement between Russia and Ukraine could bring higher economic growth in Europe, because of reducing interest rates, falling energy prices and increasing consumer confidence. The €800bn increase in defence spending decided by most EU states and the United Kingdom would also contribute to the advance of the European economy. In fact, in anticipation of this spending, the shares of most companies in the defence industry in Europe have risen in the past week.
One cannot expect the performance of European stock markets to be maintained throughout the year, unless the US postpones customs duties on European products and there is a good chance for peace in Ukraine soon.
