Momentum Swinging Back to the US, Zavolock Says

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00:00With that focus on tech, did the momentum swing back to the U.S. in the second half of this year?

00:04Yeah, it's already begun. So the momentum has swung back to the U.S.

00:08We think that that continues for now. The U.S. just has much more AI exposure than Europe does.

00:15So that will continue to drive things. And then that's coming through in earnings as well.

00:20So at this point, Europe has almost 0% earnings growth. In local currency terms, the U.S. is 9%.

00:26So that divergence.

00:27How much is pricing on tariffs when it comes to the 0%, almost 0% earnings growth for European stocks?

00:33I think 10% is price, 10% tariffs. If we get higher than that, then we're going to get some downgrades.

00:39But the tariffs exposure in Europe, something we've been saying a lot, is quite idiosyncratic.

00:45You have about 6% of revenues in Europe that are directly exposed to tariffs.

00:49And then much more broadly in terms of the kind of lingering uncertainty and direct effects of tariffs.

00:54Does stimulus coming through from Germany predominantly and some others, does that offset the tariff impact?

01:00Not yet. That's the problem.

01:02Is it a 2026 story?

01:04You'll start to see the trickle through into earnings in 2026, but more kind of in the back end of the year.

01:10And then really, it's actually a 2028 story, because a lot of the projects have three-year lead times.

01:16So you'll see more of the earnings impact in 2027, and then the big blowout in earnings will only come in 2028 for Europe.