What happens when conflicts far from Europe result in strikes on the continent and threaten European citizens, defence, companies and supply chains? With Iran’s drone attack on a British base in Cyprus, this recent escalation of the conflict demonstrates that Europe can be a target and that the continent’s economic footprint abroad carries direct security consequences. As geopolitical tensions increase and spread, defence continues to move to the centre of Europe’s strategic agenda.

For much of the past five years, EU small caps have lived in the market’s coldest corner. 2025 effectively marked a fifth consecutive year in which smaller European companies lagged their large-cap peers, an anomaly that defies decades of market patterns.

Emerging Market (EM) equities tend to move in ‘super cycles’, extended periods of outperformance or underperformance relative to Developed Markets (DM). The last EM upcycle began in the late 1990s, following the Asian debt crisis, and lasted until the early 2010s. This was succeeded by nearly 15 years of EM underperformance. However, with EM equities now outperforming DM for the second consecutive year, investors are increasingly questioning whether we are entering a new super cycle. We examine the underlying drivers and find compelling reasons to believe so.