High-stakes negotiations between the US and the European Union could affect your portfolio.
Why it matters: Negotiators are closing in on a preliminary trade deal. The clock is ticking down to President Donald Trump’s August first deadline. The EU represents more than two dozen countries and many sectors whose products flow in and out of the US. Michael Field, a European Market Strategist for Morningstar Holland, explains what’s at stake.
9 Questions:
President Trump pushed his tariff deadline from July to August. How are global markets reacting to the uncertainty during this tariff watch?The EU is one of America’s largest trading partners. How important is it for these two sides to strike a deal?And what’s at stake if they don’t before the deadline?More than a dozen countries make up the EU. The bloc is seeking lower tariffs for a variety of sectors like aircraft, car parts, and spirits. Talk about that.So, what sectors do you think could be hit the hardest, and which ones could be spared?The EU has presented a united front. However, some countries want a trade deal sooner than later. Can you talk about the debate you’re witnessing in Europe?Trade deals typically take years to be implemented, so any announcement would be a preliminary agreement. If a US investor has European companies in their portfolio, what would this framework mean for them in the long-term?Let’s shift to this year’s market performance of European stocks. What’s been winning?Which European stocks do Morningstar analysts consider undervalued, and why?
Key Quote:
“Europe, as a whole, has been winning is the answer. If you look over the last quarter or even year to date, Europe has been the real star performer in terms of global markets, ahead of the US, ahead of the global market index as an average. So, that’s good news for European stocks and investors as a whole.”
– Michael Field, European Market Strategist for Morningstar Holland
What’s Undervalued: A few sectors in Europe remain undervalued despite the rally, says Field. The list includes healthcare and consumer discretionary. Renault RNO, the French-listed automaker, is heavily exposed to Europe with 80% of its sales in that country. Kering KER is a luxury goods conglomerate that’s ripe for a turnaround when the sector bounces back. In healthcare, GSK GSK PLC, the UK-listed global pharmaceutical company, has a wide product portfolio with good cash flow.
Morningstar’s Top 3 European Stock Recommendations
Kering SA KERRenault RNOGSK PLC GSK
Read More: Field shares Morningstar’s outlook for Europe for the second half of 2025, including AI expectations and infrastructure spending. Amy Arnott, portfolio strategist for Morningstar Inc., explains why it’s not too late for investors to increase their international exposure. Here are a couple of reasons: attractive international stock prices and the benefits of a globally diversified portfolio.
The author or authors own shares in one or more securities mentioned in this article.
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