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Global equity markets remain divided: high valuations alongside consistently solid earnings and continued leadership in US technology. By contrast, the European equity market is valued significantly lower but faces rising political risks and is currently heavily dependent on government support for growth. How should investors position themselves in this environment? “We see opportunities in value stocks and high-growth technology companies – but particularly also in small and mid caps,” says Thorsten Fischer, Managing Director and Head of Portfolio Management at Moventum AM.

Small and mid caps may lack the name recognition of large corporations, but precisely for that reason they are often underestimated and, like “underdogs” in sport, can frequently deliver positive surprises. In the US, these companies could benefit from a still-resilient domestic economy and are generally less exposed to disruptions in trade policy. “Even the recent weakness in the US labour market is unlikely to be an obstacle, as it opens the door for interest rate cuts,” notes Fischer. Historically, small caps and growth stocks have tended to perform well in such phases. Risks remain in the form of US tariff policy and attempts to influence the Federal Reserve. Nevertheless, US equity markets have recently reached new record highs, driven by a mix of solid corporate earnings, economic data that has generally exceeded expectations, and hopes of rate cuts. “US equities are valued well above their historical average,” Fischer explains. “Part of this premium, however, is justified by technological leadership, tax relief and deregulation – with the prospect of further earnings growth ahead.”

Large technology companies are also seen as an indispensable component of an equity portfolio. The megatrend of artificial intelligence promises a productivity boost and solid earnings momentum, while providing an overall lift to the US economy. “This trend is likely to continue into 2026,” Fischer adds. At the same time, the expected signs of economic cooling in the US towards the end of the year, as well as political risks, call for caution. The risk-reward profile currently appears balanced, which is why Moventum is tactically maintaining its US equity allocation in both large and small caps. The focus is on small caps, technology stocks with an AI angle, and financials, which could benefit particularly from deregulation.

In Europe, fiscal stimulus is currently providing support, particularly from Germany. While fiscal leeway in Italy and Spain could also act as a boost, political uncertainty in France and US tariff policy towards the EU are having a dampening effect. “Europe offers attractive entry points by comparison,” Fischer says. “Earnings growth will remain subdued in 2025, but for 2026 we expect economic momentum from Germany’s special funds for infrastructure, defence and housing.” Value and small caps could benefit in particular – especially if growth concerns ease and the valuation gap with the US narrows. As in the US, the financial sector in Europe should also benefit from solid balance sheets and continued willingness to reform.

Emerging markets are also showing renewed strength: attractive valuations, the first rate cuts and a weaker US dollar are providing tailwinds. China, meanwhile, is sending stabilisation signals – drivers that could further support emerging-market returns.

The construction sector is likewise gaining in appeal. In Europe, infrastructure programmes and the potential reconstruction of Ukraine play a role, while in the US the focus is on expanding energy infrastructure, particularly to meet the needs of energy-hungry computing and data centres. “At present, however, we see uncertainties in the healthcare sector,” Fischer adds. Regulation, cost-cutting programmes and tariffs are weighing on sentiment. After sharp corrections, however, selective entry opportunities may emerge.