As we move further into 2025, European markets appear to be treading a more optimistic path, even in the face of global uncertainties. Alexandre Baradez, Market Analyst at IG France, shared a notably bullish outlook this week, suggesting that despite economic headwinds from across the Atlantic, the CAC 40 could be on track to reach a historic milestone: 10,000 points within the next 18 to 24 months.
This projection reflects not just technical trends, but a broader belief that European equities—particularly in France and Germany—are increasingly well-positioned to outperform their U.S. counterparts in the medium term.
U.S. Contraction Seen as Temporary, But Signals of Softening Demand Emerge
Baradez begins his analysis by addressing the recent dip in the U.S. economy. In the first quarter of 2025, the United States posted a decline in GDP—a downturn that he characterizes as “technical” and largely due to a one-time surge in imports ahead of the April 2 “Liberation Day,” a major policy rollout under former President Trump.
Despite this contraction, Baradez points out that consumer spending and business investment have remained resilient. However, he warns that forward-looking indicators are flashing caution. Consumer confidence is weakening, and major retail players such as Walmart have issued signals suggesting demand could soften in the second half of the year.
“The fundamentals are holding for now,” Baradez notes, “but when you begin to see big names in direct-to-consumer sectors expressing concern, that’s not something you can ignore.”
Europe Offers Relative Stability—and Potential Outperformance
By contrast, Baradez strikes a much more upbeat tone when discussing the European economic landscape. While the U.S. Federal Reserve continues to adopt a wait-and-see approach, the European Central Bank (ECB) is taking a more proactive stance—lowering interest rates to support the region’s economic recovery.
He estimates the probability of a U.S. recession in 2025 to be between 30% and 40%, but views the eurozone as a comparative safe haven.
“Europe is currently a zone of relative calm,” Baradez explains. “It’s becoming a place where investors may look for shelter from the global noise.”
He adds that he expects European assets to outperform American ones for several months to come, even as volatility remains elevated through the end of summer.
A Technical Breakthrough: CAC 40 at 10,000 Points?
One of Baradez’s most striking predictions centers on France’s benchmark stock index, the CAC 40. He believes the index has the potential to climb to 10,000 points within 18 to 24 months—a level that would mark a historic high.
His optimism is underpinned by long-term technical trends. “We’ve seen a strong bullish channel forming since 2019–2020,” he notes. “If this trend continues, it could very well carry the index to that symbolic 10,000 threshold within the next two years.”
While Baradez acknowledges that France currently represents a relative weak spot in Europe due to lingering political and budgetary uncertainties, he remains confident in the broader trajectory of the Paris stock exchange.
“France might be the weakest link in the European chain right now,” he says, “but that doesn’t diminish the long-term potential of the CAC 40.”
Germany’s Strength: Budget Confidence and Defensive Stocks
Turning to Germany, Baradez expresses even more confidence. He notes the psychological safety net forming around the DAX, often referred to as a “Put”—a term borrowed from options trading to imply market protection against declines.
This protective sentiment is supported by Germany’s robust fiscal tools—what Baradez calls a “budgetary bazooka” that remains top-of-mind for both investors and policymakers.
Germany’s leading firms, particularly in the software and defense sectors, are helping support this confidence. Baradez specifically highlights SAP and Rheinmetall as defensive plays likely to attract investment during periods of uncertainty.
“The DAX is set to benefit from strong sector leadership,” he explains. “These are companies seen as safe havens, and that perception matters when volatility rises.”
He also notes promising signs of improvement in historically more fragile economies such as Spain and Italy, suggesting that the broader European economic engine is gaining strength.
The American Market: Rich Valuations and Rising Doubts
Despite an aggressive “buy the dip” mentality in the U.S. equity market, Baradez warns that this strategy may not be as sustainable as it once was. He notes that the S&P 500 remains highly valued, with forward price-to-earnings (P/E) ratios well above those of European indices—and hovering near historical peaks.
“Previous rebounds were supported by strong Federal Reserve backing,” Baradez says. “But that’s not the case now. The Fed is on pause, waiting to see how the economy absorbs Trump’s tariff policies.”
He adds that Trump’s protectionist measures are effectively blocking the path to interest rate cuts by the Fed—a policy divergence that could weigh on U.S. equities in the months ahead.
Even so, Baradez is cautiously optimistic that the worst may be behind in terms of trade policy fears. “The threat from tariffs seems to be easing, at least for now,” he says. “It’s not fully resolved, but the outlook is shifting toward gradual improvement rather than further deterioration.”
A Strategic Shift in Exposure
Given the contrasting outlooks, Baradez recommends a tactical pivot in investment strategy: reduce exposure to U.S. equities in the short term and reallocate more capital to European markets.
That said, he doesn’t foresee a long-term crisis for the U.S. economy. “These are just growing pains,” he concludes. “Looking three to four years out, I’m not worried.”
For now, investors may find better risk-reward opportunities in Europe, where supportive monetary policy, improving fundamentals, and attractive valuations combine to create a compelling case for growth—especially as the CAC 40 eyes a potential run toward the 10,000-point mark.