Christina Hooper 4.3 6 ideas

Hooper states their 2026 outlook favors "emerging markets and favoring developed ex-US." She notes US valuations are stretched while international markets have catalysts. Specifically, Japan has a new PM focused on "fiscal stimulus," and Germany is ramping up "defense and infrastructure spending" due to geopolitical threats. US growth rests on "fragile pillars" (AI capex and high-end consumers). If the US slows or enters a modest recession, capital will rotate to regions with active fiscal support and lower valuations (Japan/Europe). LONG International Equities (specifically Japan and Germany) as a valuation and stimulus play. Global recession drags down all equities; stimulus measures fail to materialize.

Hooper notes that 2025 growth was driven by "AI capex spending." However, she warns of "speed bumps" for 2026: NIMBYism, power costs, and borrowing constraints. She points out MSFT has underperformed the S&P 500 since Nov 2022 despite the AI boom. If companies decide to "slow down and see the results before we throw more money at this," the primary driver of US economic growth (AI Capex) evaporates. This makes the Hyperscalers vulnerable to a rerating if spending pauses. NEUTRAL / WATCH. The "murder mystery" phase implies picking winners is hard; blind exposure to the group is risky. AI delivers productivity gains faster than expected, justifying continued massive capex.

Hooper notes that Europe, particularly Germany, has a "very real and immediate reason to increase defense and infrastructure spending" due to the Russia threat. Regardless of the economic cycle, geopolitical reality forces European governments to spend on defense. This provides a non-cyclical floor for defense contractors and infrastructure companies in the region. LONG European Defense/Infrastructure beneficiaries. Geopolitical tensions de-escalate significantly (unlikely in short term).