bonds

As Europe braces for Trump’s return, Bill Campbell at Doubleline warns of a ‘Terrible Trifecta’ of political, economic, and external pressures disrupting global order in 2025

European investors are heading into 2025 with a stark warning: tread carefully. Analysts at Axa Investment Managers (Axa IM) have painted a picture of fragile markets, wavering economies, and thin margins for mistakes.

Despite fewer rate cuts than anticipated, the ’bonds are back’ narrative itself has returned with renewed vigour.

Europe’s equity market is increasingly viewed as a neglected corner of global investing—overshadowed, overlooked, and unloved.

Believe it or not, Donald Trump’s return to the White House might just be good news for Europe’s fixed income markets. While U.S. investors brace for renewed protectionism and inflation risks, Europe’s debt landscape is showing signs of resilience—possibly even appeal.

With the United States facing another daunting budget deficit of seven percent of GDP this year, such alarming depictions of debt are proliferating.

The spread on French government bonds has peaked again, showing that financial markets are on edge ahead of Sunday’s elections. Until they conclude later in July, many investors are favouring other European government bonds. “Any reminder of the European debt crisis is a red flag for international investors,” one analyst remarked.

High yield bonds are positioning themselves cautiously in the spotlight as recession fears recede and credit quality improves. While junk bonds perform best during periods of robust economic growth, a region that’s closely flirting with a recession is seen as having the most potential.

Index products have seen significant inflows at the expense of active products, reflecting increasing interest from both institutional and retail investors. The outlook for Europe remains positive in the coming years. Bond ETFs in particular still have strong growth ahead of them.

Last year was a tough one for financial markets, and the ETF segment was not left behind as assets under management - at the global level - fell for the first time since 2011. 

European investors this year found safety in short-term US debt and the dollar. This week’s Top 5 by Morningstar takes a look at the performance of US government bond funds in the year to date.