Bank of America Warns of Fragile European Market Amid Global Trade War Concerns
- Bank of America warns that the European market rally may be unsustainable due to ongoing global trade tensions.
- The firm predicts an 11% decline in the Stoxx Europe 600 index, highlighting corporate profitability risks.
- Bank of America notes younger generations are prioritizing health and wellness, impacting spending and lifestyle choices.

Bank of America Highlights Concerns Over European Market Optimism Amid Global Trade War
As European stock markets experience a notable rise in 2025, Bank of America’s Head of European Equity Strategy, Sebastian Raedler, articulates significant concerns regarding the sustainability of this rally. The Stoxx Europe 600 index has surged approximately 7% year-to-date, largely attributed to investors seeking alternatives amid uncertainties in the U.S. market. However, Raedler cautions that this optimism may be misplaced, particularly in light of the ongoing global trade tensions that are expected to impose substantial costs on corporations. He notes that companies face an annualized increase of $190 billion in tariffs, which could equate to around 7% of corporate profits in the first quarter of 2025. This rise in operational costs has yet to be fully transmitted to consumers, raising the likelihood of profit margin pressures for a broad swath of companies operating in Europe.
Raedler’s bearish perspective suggests that the Stoxx Europe 600 index could decline to 490 within a year, reflecting an 11% downside. He emphasizes the fragility of the current market rally, pointing to a disconnect between market performance and the underlying economic realities that threaten corporate profitability. In contrast, analysts at JPMorgan advocate for a more cautious stance, predicting that the index may stabilize around its current level of 540 after a minor rally that could push it to 580 by year-end. This conservative outlook is influenced by the economic strain resulting from tariffs, as U.S. companies, which have not yet completely felt the effects of increased tariffs due to prior inventory strategies, could soon face similar challenges.
In light of these developments, Bank of America’s insights signal a critical moment for investors and corporations alike in Europe. The potential repercussions of the trade war loom large, with Raedler’s analysis suggesting that optimism may be overly reliant on an assumption of unimpeded growth. The interplay between global economic pressures and local market responses will be pivotal as stakeholders navigate the uncertain landscape ahead.
In a separate trend, Bank of America analysts observe that younger generations, particularly Gen Z and millennials, are increasingly prioritizing health and wellness, with spending surpassing $500 billion in the U.S. This demographic shift indicates a significant change in leisure preferences, with fitness activities seeing greater participation than traditional nightlife venues. The rising interest in non-alcoholic beverages further underscores this trend, reflecting a broader cultural movement towards healthier lifestyle choices.
Moreover, billionaire investor Warren Buffett's recent shift in investment strategy, moving away from major financial institutions like Bank of America to invest in Sirius XM Holdings Inc., highlights an evolving landscape in investment priorities. This change points to a broader trend where investors are exploring growth opportunities in sectors that align more closely with changing consumer behaviors and preferences.