Investment Rating - The report does not explicitly provide an investment rating for the industry or specific companies Core Insights - Overall demand for US equities has declined, but there is no significant selling observed, with net flows feeling lower due to unusually high flows in the second half of 2024 [4][6] - Europe has emerged as the primary destination for equity fund flows, with a notable increase in flows to European equity funds while flows to US stocks have decreased [9][10][12] - European investors hold €2.6 trillion of US debt, representing over 10% of fixed income assets in the euro area, indicating a significant cross-border investment [21] - Strong inflows to European fixed income funds have been observed since 'Liberation Day', although this has not yet translated into increased demand for European debt securities [24][29] - The EUR/USD exchange rate is expected to rise to 1.27 by the end of 2026, driven by both fundamental and technical factors, with increased hedging incentives due to rising volatility [34][42] - European equities are projected to show a consensus EPS growth of 1.3% in local currency terms for 2025, but in USD terms, this growth is expected to be 7.6%, indicating a favorable outlook for European stocks [63][65] - The European securitized market, currently valued at approximately €550 billion, has potential for growth due to ongoing regulatory reforms, which could lead to substantial market expansion [69][81] Summary by Sections Fund Flows - Demand for US stocks has decreased, but there is no evidence of significant selling; net flows to US equities are lower due to high previous flows [4][6] - Europe is now the leading destination for equity fund flows, with minimal spillover to other regions [9][10][12] European Debt Holdings - Euro area investors own €2.6 trillion of US debt, which is over 10% of their fixed income assets [21] - Evidence of stronger inflows to European fixed income funds has emerged, but this has not yet impacted demand for European debt securities [24][29] Currency and Hedging - The EUR/USD exchange rate is forecasted to reach 1.27 by the end of 2026, influenced by fundamental and technical factors [34] - Increased volatility and uncertainty are raising hedging incentives, with approximately $4 trillion in unhedged US assets potentially needing hedging [42] European Equities - European consensus EPS growth for 2025 is projected at 1.3% in local currency, but 7.6% in USD terms, indicating a positive outlook for European stocks [63][65] Securitized Market - The European securitized market is valued at around €550 billion and has potential for growth due to regulatory reforms [69][81]