By Caroline Lamy, Head of Equity Management, Crédit Mutuel Asset Management

Crédit Mutuel Asset Management is an asset management company of Groupe La Française, the holding company of the asset management business line of Crédit Mutuel Alliance Fédérale.

Over the past three months, equity markets have kept the overall positive trend seen throughout the year, supported by the gradual normalization of monetary policy, resilient growth, and a broadening of performance drivers beyond large US growth stocks.

During 2025, European markets posted a 20%[1] performance in € (36% in $). This was driven by a strong rebound in cyclical and value stocks – particularly financial, industrial, and defense stocks. Over last three months: markets1 showed solid performance, in an environment of declining inflation and greater visibility on the ECB's trajectory. European companies benefited from two sources of support: (i) valuations that remained attractive compared to the United States, (ii) and expectations of sustained lower interest rates in 2026. This allowed Europe to outperform again at the end of the year, despite a macroeconomic environment that is still heterogeneous.

Valuation of European small and mid-cap remains attractive. The rebound could be supported by stimulus packages and the Defense and Sovereignty theme, with one key question: when will this re-rating materialize.

In the United States, the economy and consumers are resilient. We are still seeing a high concentration in indices, particularly in the S&P 500, where the “Magnificent 7” account for almost a quarter of the index's weight. Compared to previous years1, the outperformance of these seven stocks compared to the rest of the market has been more moderate and differentiated. The artificial intelligence (AI) theme remains present, but the market is diversifying in response to questions about the return on the massive investments announced. There is also renewed interest in mid-cap US stocks. The referent index Russell 2000, for example, has outperformed since the beginning of 2026.

With regards to emerging markets, the end of the year was conducive to selectivity, particularly in the technology sector. We maintain a positive view on Asia in this dynamic. In Japan, the economy has been on a solid trajectory for several months, but we are adopting a neutral position on the region in favor of other regions. We cannot say that China is improving dramatically, but the situation seems to be stabilizing, which is reflected in the strong performance of its equity markets.

In our asset allocation we remain generally positive on equities. However, some complex factors remain:

- Proving that AI is not a bubble, each sector or company will have to explain the productivity gains it will generate and by when;
- Geopolitical risk will persist at least until the US mid-term elections.

In conclusion, we are reasonably confident about the coming months. The earnings season should confirm expectations for earnings growth and set the tone for the future. We remain, of course, highly attentive to any shifts in interest rates and geopolitical developments.