European equities have been top of the stocks this year, with MSCI Europe soaring 12.1% in 2025 as countries throughout the region upped defence spending and loosened their fiscal policies.
A potential ceasefire in Ukraine also offered the semblance of stability, which juxtaposed with mounting uncertainty in the US after President Donald Trump’s inauguration.
This reallocation of money away from the US and into European equities was a change in tune from the S&P 500’s dominance in recent years. So far this year, the US index is down 4.7% – even after its ‘liberation day’ recovery.
Yet while European equities continue to serenade investors, some stockmarkets are hitting the high notes better than their neighbours.
Here, three fund managers share the European equity markets they are most excited about in the months ahead.
Germany
Germany may have placed 15th at Eurovision this weekend, but its stockmarket has taken the spotlight for investors this year – and looks set to continue outperforming, according to the JPMorgan European Growth and Income trust manager Zenah Shuhaiber.
The MSCI Germany index is up a whopping 21.7% this year and could have plenty of growth left ahead of it.
“With European equities still trading at a discount to their US counterparts, Germany stands out as a source of both value and long-term growth potential, particularly across strategically important industries,” Shuhaiber said.
“Many of these are world-class companies operating in sectors aligned with the energy transition, digitalisation, and capital markets infrastructure. Investor confidence has been further strengthened by signs of increased capital expenditure and supportive regulatory developments.
“For example, E.ON has built on its strong financial performance earlier this year with continued share price momentum, buoyed by growing optimism around Germany’s energy policy.
“Financial infrastructure is another area of focus, with Deutsche Boerse standing out for its strong fundamentals, including a robust balance sheet and a €500m share buyback programme.
“The company is well placed to benefit from rising trading volumes and increased demand for data and analytics. Combined with broader fiscal support across the eurozone, Germany’s proactive stance is reinforcing the investment case for quality names across these sectors.”
Austria
Germany may have led the choir so far this year, but Pras Jeyanandhan, European equities fund manager at Tyndall Investment Management, is more excited about neighbouring Austria.
Its Eurovision act came out victorious with first place this weekend, and its equity market could soon follow suit.
“While Germany may be the chart-topping favourite, our ‘douze points’ goes to Austria — the surprise underdog quietly hitting all the right economic notes,” Jeyanandhan said.
“With nearly a third of its exports heading to Germany, Austria could very well Rise Like a Phoenix — the title of the song that won Eurovision for Austria in 2014 — on the back of its neighbour’s industrial recovery.
“And while Mozart may still be the only Austrian musician most investors can name, this market is playing a more modern tune. To the east, the prospect of a Ukraine ceasefire could cue a more upbeat tempo across Central and Eastern Europe — where Austrian firms already have a strong presence.
“It may not be front of stage just yet, but Austria’s performance is warming up nicely. And who knows, Austria’s latest performance could well be a symphony investors want to hear.”
Italy
Further south, the MSCI Italy index has enjoyed a sizable 22.8% return so far this year, but has gone relatively unsung amid the chorus of strong performers in Europe, according CT Private Equity trust manager Hamish Mair.
Its attractive investment profile could become less muffled in the months ahead as investors come to notice its strong growth potential.
“Famous for its ancient classical culture and great works of art, as well as wonderful scenic countryside and of course La Dolce Vita with great food, wine and general enjoyment of the finer things in life, Italy isn’t the first place that comes to mind when investors think private equity,” Mair said.
“But, as one of the larger economies in Europe with a well established engine of growth and industrial innovation centred around Milan and the other great cities Italy, it boasts a thriving private equity sector.
“Our portfolio contains some intriguing companies, some of which play to Italy’s well-known strengths, and others which may be more surprising.
“Food and drink is well represented in the portfolio, via investments made by mid-market firm Aliante – with platform investments in both the bakery and pasta sectors. Furniture is also an area of strength and through the Progressio II Fund we are exposed to luxury furniture maker Giorgetti.
“We have a couple of investments with mid-market experts, Augens, most notably the funeral homes chain, San Siro, which has now been vertically integrated into crematoria. Augens also lead on Bomaki, a chain of restaurants with a fusion cuisine of Sushi – Samba.
“The leathermaking and accessories industry is another sector represented, this is through the DBAG VIII fund, which is interestingly managed from Germany, where we hold Metalworks who provides the metal components for luxury handbags.”