Roelof Salomons hit the ground running when he became Chief Strategist at Blackrock Netherlands exactly six months ago. According to him, we are at a turning point. Capital flows are shifting direction, creating tremendous opportunities for investors in Europe.
At the end of last year, Salomons still considered US equities to offer the best prospects for 2025, with European corporate bonds also catching his eye. But just a few months later, the world looks very different, the Blackrock expert told Investment Officer. “Normally, we send out two internal memos a week on the latest developments in the financial markets, but in recent months that frequency has increased to four or even five times a week.” Client interactions have also intensified. “In the past few weeks, I’ve had as many conversations as I usually would in several months.”
Developments in Europe, in particular, are unfolding rapidly. “In the past fifty years, I’ve never seen Europe act this swiftly and decisively.” Salomons called it a Zeitenwende, a historical turning point. “Germany’s willingness to take on more debt, the investment plans for defense and infrastructure, and the growing cohesion among European countries are major steps—ones that carry even more implications than we’ve already seen over the past two months.”
Draghi report still on the table
Actions out of Brussels have led to a revaluation of European equities. Salomons noted that the discount on European stocks compared to US equities has narrowed from forty percent at the end of 2024 to thirty percent now. According to the BlackRock strategist, this shift could be just the beginning, though he also acknowledges that Europe’s structural problems haven’t suddenly disappeared.
Many recommendations from the Draghi report still need to be implemented, and European companies are still struggling with increased competition. These are issues that Salomons believes must be addressed to sustain Europe’s recent momentum. “But at least there are now concrete reasons to believe that real change is coming.”
Blackrock has recently moved from a negative stance on European equities to a neutral position.
Salomons prefers to avoid European government bonds, citing the massive need for financing and a European Central Bank that appears to be nearing the end of its rate-cutting cycle—depending on the impact of tariffs. Add to that slower growth in Europe and slightly higher demand-side inflation, and there’s good reason to expect rates to remain higher than anticipated. “We are no longer positive on European government bonds.”
Cracks in American exceptionalism
What indirectly benefits European markets, according to Salomons, are concerns that the current policy direction under President Trump may be causing cracks—particularly in the concept of American exceptionalism. “Since the rise of China’s Deepseek, which appears to make AI adoption cheaper and easier, the question of whether American tech is truly as exceptional as believed is increasingly coming to the surface.”
Still, Salomons doesn’t yet see Trump’s policies discouraging companies from investing in the US, pointing to TSMC’s recent 100 billion dollar investment plans as an example. “Companies are not yet adjusting their strategies, and I think that’s a good thing. In the long run, what matters most is a reliable and stable government to support the economic cycle and safeguard capital flows.”
High levels of uncertainty
That said, the Blackrock strategist sees significant uncertainty looming over the market. “Investors should not underestimate that.” This uncertainty, he says, is evident not only in the VIX index but also in trade policy uncertainty, which is at record highs. “That definitely affects the mindset of CFOs who need to make decisions now for the years ahead, possibly causing them to postpone investments. The longer policy uncertainty lasts, the greater the eventual impact on the global economy.”
So how should investors navigate this uncertainty? According to Salomons, the key lies in proper diversification of the investment portfolio. “If sixty percent of the world is invested in US equities, that’s no longer truly diversified.” Last week, Blackrock downgraded its view on US equities to neutral.
Nonetheless, Salomons believes long-term investors will still be rewarded for taking on risk. In the short term, however, he advises caution. “Uncertainty needs to decline significantly before short-term investors can confidently step back in. This is not the time to play the hero.”
Heavy-handed moves
Part of the current uncertainty is tied to US import tariffs, which range from a lower bound of ten percent to an upper bound of twenty-five percent, with notable outliers—especially when it comes to tariffs on China. “That’s a fairly wide range, and it’s still unclear where the final levels will land.” There’s also uncertainty about how other countries will retaliate. “China came in hard on Monday and again yesterday, but Europe has yet to respond.”
According to Salomons, long-term investors are capable of looking beyond today’s uncertainty. “In Europe, we’re seeing growth picking up and substantial investments on the horizon. The countries and regions where domestic policies can counteract global uncertainty are where the first opportunities will arise.”
Not only broader regional diversification but also diversification across asset classes is important, according to the Blackrock strategist. From that perspective, he believes the current appeal of private markets is likely to persist. “Governments are heavily indebted and can’t fund everything. So, a significant part of the energy transition will have to be financed by investors. It’s important that the market can do its job without too much government interference.”
In conclusion, Salomons advised reducing risk and exercising caution until more clarity emerges. “Fewer equities and more cash, in other words.”