FRANKFURT (DEUTSCHE-BOERSE AG) - Hopes for a trade deal with the U.S. have been dashed for now. While some point to already overstretched valuations, many see this as a good buying opportunity.
July 14, 2025. FRANKFURT (Borse Frankfurt). U.S. President Trump's announcement that imports from the EU will be hit with a 30 percent tariff starting August 1 is weighing on the markets. After weeks of negotiations, a conciliatory resolution to the trade dispute had been expected. As recently as Wednesday, the DAX reached a new all-time high at 24,639 points, but by Monday morning it had slipped to just 24,020. The Stoxx Europe 600 is also showing signs of strain. Notably, Bitcoin has hit a new record: in early trading, the leading cryptocurrency climbed above the $120,000 mark for the first time, currently standing at $122,000.
"Pivotal Moment in Tariff Saga Approaches"
Market sentiment had already cooled by Thursday--Trump had threatened the EU with blanket punitive tariffs of 15 or 20 percent. On Saturday, he made it official: 30 percent from August. "Uncertainty is high, especially as trade restrictions via tariffs have negative effects on both economic growth and inflation," notes Helaba analyst Ulrich Wortberg.
"Donald Trump's letter to the EU is neither a love letter nor a hate letter. It's a letter meant to increase pressure in ongoing negotiations," comments ING chief economist Carsten Brzeski. The coming days and weeks will show whether Europe is willing and able to make compromises to America's liking. "In any case, these letters indicate that the decisive moment in the tariff saga is drawing ever closer."
Are Valuations Too High?
According to Soren Hettler of DZ Bank, valuation metrics for most indices are already in expensive territory. Earnings expectations per share have not kept pace with the recent price increases, and the price-earnings ratio is well above the long-term average. Other indicators such as price-to-book ratio, dividend yield, or risk premium versus government bonds also point to very ambitious valuations. Hettler sees elevated downside risks in the short to medium term--especially for the DAX and S&P 500. "But 2026 is likely to bring sustainably higher prices and new records."
"Use Weakness for Buying Opportunities"
Andreas Hürkamp of Commerzbank recommends that, given the promising economic outlook for 2026, investors should use any potential market weakness in the coming months to expand DAX positions. "A mixed earnings season for the DAX--due to a strong euro--and a short-term rise in U.S. inflation from import tariffs may temporarily slow the DAX's record run during its seasonally weaker months of August and September," he notes.
Start of U.S. Earnings Season
On Tuesday, Citigroup, JP Morgan, and Wells Fargo will kick off the U.S. earnings season for the second quarter. On Wednesday, Bank of America, Goldman Sachs, and Morgan Stanley follow. The reporting continues rapidly, including Johnson & Johnson and Netflix. According to DekaBank, the consensus for the S&P 500 expects earnings growth of about 3.5 percent--a clear slowdown after the surprisingly strong first quarter. The bank expects S&P 500 companies in particular to report figures well above estimates. "However, investors may have already priced in some of the good news," explains Ulrich Kater.
Key Economic and Business Data
Tuesday, July 15
4:00 a.m. China: Q2 GDP. According to DekaBank, Chinese exporters have cushioned the impact of higher U.S. tariffs through circumvention strategies and increased sales in other markets. Nevertheless, growth has likely slowed.
11:00 a.m. Germany: ZEW Economic Sentiment for July. DekaBank notes that the ZEW Economic Sentiment for Germany has returned to pre-"Liberation Day" levels in July. While the assessment of the current situation doesn't yet reflect this recovery, it could at least reach its highest level in two years.
2:30 p.m. USA: June Consumer Prices. Deutsche Bank expects inflationary pressure to have continued rising. The annual headline rate is expected to increase from 2.4 to 2.6 percent, and the core rate from 2.8 to 2.9 percent.
Thursday, July 17
2:30 p.m. USA: June Retail Sales. According to Commerzbank, the data will show that the U.S. economy is currently experiencing a weaker phase due to ongoing uncertainty in the trade dispute.
By: Anna-Maria Borse, July 14, 2025, © Deutsche Borse AG
About the Author
Anna-Maria Borse is a financial and economics editor specializing in financial markets/exchanges and macroeconomic topics.
(Deutsche Borse AG is solely responsible for the content of this column. The articles do not constitute an invitation to buy or sell securities or other assets.)
