00:00Broadly across the tech space, you're still getting very good earnings growth.
00:03I think that will continue.
00:05But also, important to say that this massive ramp up in spending
00:09that the hyperscalers have been doing has been and I think will continue
00:13to trickle out into some better earnings growth into other sectors
00:19which are really helping to support that infrastructure build out.
00:22And that's why we are seeing a bit of a broadening out
00:24and why actually Europe, as you mentioned, has been holding up well.
00:29In fact, the first half of the year doing it as well as the S&P
00:32despite having much lower exposure to technology.
00:35It's quite an amazing statistic, isn't it?
00:36It is.
00:37Since the beginning of the war, slightly different.
00:39But if you go back to the start of the year, yeah, Europe holding up as well
00:44despite all of our focus on AI.
00:46What is your level of conviction that that European story continues?
00:49Is there a rate risk if the ECB officials are sounding pretty cautious right now
00:54in terms of second round effects on inflation?
00:56Do interest rates derail the story?
00:58Do politics derail the story?
01:00We were speaking to a previous guest at Barclays saying there's a six-month window
01:03for further upside for European stocks and then 2027 is a very different story.
01:07Well, look, I think the first thing is that there's still a valuation advantage
01:12that Europe has relative to other markets, even when you sector adjust.
01:17So when you look at comparable companies in Europe, they tend to have a lower valuation.
01:21It's true, on average, they tend to have lower growth rates,
01:25but profits are holding up really quite well, and I think that will continue.
01:30So from here, given that we don't expect rates to be trending down,
01:35although we do expect them to come down again next year,
01:39the main driver of equity markets is going to be profit growth through the remainder of the cycle.
01:45I think Europe stacks up reasonably well.
01:47It has been the weakest of the major markets since 2025, but only marginally weaker than the US.
01:55And when you consider that so much of the focus has been on technology and Europe has lower exposure,
02:01that is a reflection, actually, of many of these other areas that Europe has exposure to in the value space,
02:07actually generating pretty good cash flows and shareholder returns.
02:10I think that will actually continue.
02:12So I would expect more moderate index gains, but still Europe making some decent progress.
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