A combination of global and Europe-specific forces is reshaping the region’s economic and market outlook. Wellington Management sees evidence that Europe is shifting toward a more domestically focused and interventionist model, with rising geopolitical tensions and fiscal expansion driving this transformation. As global trade declines in importance, international exposure may become less attractive, benefiting domestically oriented businesses and periphery markets.

“From an equity perspective, I expect this to translate into a rotation from stocks with international exposure to more domestically focused companies — with periphery countries as the relative winners — and from growth to value stocks,” says Nicolas Wylenzek, Macro Strategist at Wellington.

Meanwhile, increased fiscal flexibility and targeted intervention—particularly in defense, energy transition, and digitalization—are creating new sector-specific opportunities, the asset manager highlights.

Read the full insight here.