Weakened confidence in the American economy
The changing messages from President Trump about tariffs on goods from countries such as the EU, China, Canada and Mexico make it difficult for American companies to plan investments, etc., causing them to hold back. And most recently, we saw Trump follow through on his threats to impose tariffs that can, at best, be descried as detrimental. The situation is causing turmoil worldwide, particularly undermining confidence in the American economy and creating increased uncertainty about how the US central bank (Fed) will set interest rates.
At present, most analysts expect two interest rate cuts of 0.25 percentage points each in 2025, but FED may be forced not to meet these expectations in order to reach their inflation target. A higher interest rate would have a negative impact on the American stock market.
”Our confidence in growth in the US is falling because we can see that American companies and consumers are not spending as much money. There will be more investment in Europe, which means that growth expectations in Europe are becoming brighter,” says Thor Schultz Christensen.
Interest rate developments in Europe
Inflation figures in Europe give reason to expect that monetary policy interest rates will fall over the course of 2025. However, it is clear that the situation in the US also has an impact on Europe in terms of increased uncertainty.
At the same time, the prospect of large fiscal easing in Germany in particular plays a role in the growth and interest rate outlook. The German Parliament have decided to set up a EUR 500 billion fund for investments in the country's defense and infrastructure over the next 12 years It will modernise Germany and at the same time stimulate growth. We expect these measures to boost the appeal of the European stock market, but also to put underlying upward pressure on especially long-term European interest rates. This became evident in early March, when Germany's financial policy plan became clear. As a result, both short- and especially long-term German interest rates took a jump up, and we've seen a spillover effect on Danish interest rates, which have also risen somewhat.
