US president Donald Trump's fast-paced tariff agenda drove big swings in markets in the first 100 days of his second term, seeing European stocks outperform US equities year-to-date.

The S&P 500 (^GSPC) is down 3.6% year-to-date, at the time of writing, while the tech-focused Nasdaq (^IXIC) has fallen 7.6% in that time and the Dow Jones Industrial Average (^DJI) is 3.2% in the red.

By comparison, the pan-European STOXX 600 (^STOXX) is up 6.1% so far this year. The UK's FTSE 100 (^FTSE) is 5.2% in the green, while Germany's DAX (^GDAXI) has gained 15.5% and France's CAC 40 (^FCHI) has advanced 4.9% year-to-date.

HSBC (HSBA.L) European equity strategists said in a note on Friday that the "ongoing trend of rotation of capital into Europe this year, so far, is largely driven by the US trade policy related uncertainty."

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Since Trump's announcement of sweeping tariffs, on what the president dubbed "Liberation Day", they said that there had been a synchronised sell-off across major US assets – the S&P 500, 10-year Treasurys (^TNX) and the US dollar index (DX-Y.NYB). The strategists said that this is "rare phenomenon" and has happened only approximately 9% of the time since the 1970s.

"A key question for investors is whether this reallocation of assets into European equities will continue in the period immediately ahead," they said. "Our analysis shows that European equities generally outperformed the US benchmark on average during periods when the three US asset classes fell simultaneously, or when the period of uncertainty endured for longer."

"Typically, crises with global ramifications do not affect all US assets at the same time, but the current crisis is largely linked to the US trade policy, which might influence investor sentiment and could benefit assets in other markets, such as Europe," they added.

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HSBC's strategists said that given the high underlying uncertainty, they believed that the ongoing rotation into European equities "has further to run".

They said that amid a weakening macroeconomic outlook and currency headwinds, they are also lowering their 2025 forecast for earnings per share growth for companies in the FTSE Europe index to 2.9%, from 4.4%, which was also lower than the 3.2% consensus estimate.

"Year-to-date, the [US dollar] has fallen approximately 10% against the [euro], which could significantly affect the overseas earnings of European corporates over the coming quarters," they said. "Therefore, we think increased uncertainty could further affect consensus and our EPS growth estimates, and we see more downside risks.