Geopolitical risk premium not yet seen in broader market; things would need to escalate further. We really like the defense sector and have been calling for a strong seasonal rally.

European defense valuations at a premium to US, but European growth is higher with the rearmament trade. Multiple catalysts: US raising defense spending, Europe needing to rearm, Greenland headlines.

Current geopolitical risk means more spending in Europe. Defense rearmament taken seriously, spending goes up, investment goes up, companies re-leveraging. So far, this is just a positive for the market, benefiting defense and broader European re-rating.

Below consensus on European earnings due to China competition. Europe's net exports vs. China are rolling over. 60-90% of consensus downgrades in recent years linked to China exposure.

Europe has more exposure to US consumer than European consumer. Underweight discretionary retail in Europe, but it's a small sector. About a quarter of European revenues come from the US where things are still relatively strong.

We like AI. Europe has pockets of AI exposure in semis and cap goods. The big debate is when AI adoption ROI is recognized. In banking sector, AI ROI is driver #7; needs to move to top 3 for market to take it seriously. Could happen in second half.