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The dynamics of the global economy are shifting. While the US economy remains resilient, the United States is increasingly falling behind. Europe is using the geopolitical and economic vacuum to reposition itself with newfound confidence. For investors and businesses, this means opportunities in Europe are growing and could deliver lasting growth momentum. “The coming months are likely to be decisive in determining whether this trend becomes permanent,” says Thorsten Fischer, Managing Director and Head of Portfolio Management at Moventum AM. However, one factor that cannot be overlooked in shaping the fate of international financial markets is the precarious situation between Israel and Iran. “It could partially slow down the positive trend for Europe.”

No exception lasts forever – not even US “exceptionalism” or the strength of its economy. As the second quarter of 2025 began, the US came under political and economic pressure and is now losing momentum. “A growing sense of pessimism is spreading across the economy and society,” says Fischer. The main reason for this: the confrontational, isolationist policies of US President Donald Trump. His protectionist tariffs are frustrating trade partners, and domestically, the mood is becoming increasingly polarised, as recent clashes in Los Angeles demonstrate. Furthermore, the US no longer plays a de-escalating role but is actively fuelling conflicts. “The old-world order appears to be breaking down, triggered in part by escalating geopolitical tensions – especially in the Middle East – which are ushering in a new reality for investors,” Fischer explains.

This is currently reflected in the US not only in “soft” data, such as consumer confidence, but now also in “hard” economic indicators. “A telling example is the ISM Services Purchasing Managers’ Index, which has slipped into contraction territory with a reading of 49.9,” Fischer notes. The economic uncertainty is also mirrored in the Economic Surprise Index – a gauge of the gap between expectations and actual data – which has recently turned negative, signalling mounting headwinds for the economy.

In the coming months, US economic growth could weaken slightly. While there was an annualised growth rate of 2.1 per cent in the first quarter, the consensus among international economist’s points to 1.7 per cent for the second quarter, followed by 1.2 per cent in the third. Since Trump initially suspended his “reciprocal” tariffs, the likelihood of a US recession has decreased further. However, the average US tariff rate still stands at 16 to 18 per cent – levels last seen in the 1930s. This already significant burden on consumers and businesses could intensify if the tariff dispute flares up again, pushing the US economy further towards recession. “Potential tax cuts and deregulation could provide some stability later in the year,” says Fischer. “But a noticeable upturn is not expected before the first quarter of 2026.” One ongoing concern for investors remains Washington’s soaring national debt, which already stands at 36 trillion dollars – even without the planned tax cuts.

“The recent escalation in the Middle East could particularly halt the recent positive trend in US inflation,” says Fischer. Following Israel’s airstrikes on Iranian nuclear facilities, the oil price surged by up to 14 per cent – the sharpest daily rise in over five years. Rising oil prices risk triggering an inflationary spike through higher petrol prices at the pump. “And for US citizens, petrol prices are the ultimate benchmark for inflation,” Fischer notes. If elevated oil prices persist, this could also delay interest rate cuts in the US.

In contrast, economic conditions in Europe appear more promising, as the continent undergoes a kind of rebirth: Make Europe Great Again – MEGA instead of MAGA. The Old-World's politics are showing new resolve, economies are undergoing reform, and investment appetite is growing. Midway through the second quarter, the economic outlook in Europe also appeared more favourable than in the US. “The combination of geopolitical reorientation, increased self-reliance, and proactive fiscal policy has created positive momentum,” Fischer explains. The eurozone is benefiting from the loss of confidence in the US, which is also evident in the international capital markets: inflows into European assets have increased significantly, driven by a shift in image towards stability and predictability.

A key driver of this is Germany, which is setting new economic stimuli with two special funds of 500 billion euros each and planned tax relief measures – including a gradual reduction in corporate tax to ten per cent starting in 2028. While these measures will only have their full effect in the medium term, they send a clear signal: Europe is ready to take on economic responsibility and invest strategically.

Current growth in the eurozone remains modest, at 0.1 per cent in the second quarter and a projected 0.1 to 0.2 per cent in subsequent quarters, but the outlook is becoming increasingly positive. The investment climate is also improving thanks to a clear interest rate trajectory from the European Central Bank. In June, it reduced key rates to two per cent, with a further cut to 1.75 per cent expected by the end of the year.

“The US remains, for now, the anchor of the global economy and its growth,” Fischer concludes. “But the combination of erratic trade policy, a polarised domestic climate, and mounting debt is eroding trust in the United States.” This is Europe’s opportunity – and a potential opportunity for investors.

“Nevertheless, given the current events in the Middle East, investors should keep one principle in mind: capital preservation takes priority,” says Fischer. Diversification is more important than ever, especially in regional allocation. Inflation-sensitive assets such as gold, commodities, and inflation-linked bonds help to stabilise portfolios. “The clear and orderly times are over,” Fischer concludes. “In an unstable world, investors must think long-term, act calmly, and maintain resilient portfolios. Geopolitical shocks will dominate in the short term, but with substance and diversification, investors remain capable of taking action.”