1. The post-election gains are gone.

It was another day of volatility in the market, with the major indexes pushing toward ‘correction territory’ and giving back all of their post-election gains. Small-cap stocks are leading to the downside, as recession fears are hitting the smallest and ‘riskiest’ companies in the market.

Adding to the fear were comments from Best Buy and Target signaling that price increases would be highly likely under Trump tariffs and their results signaling consumer softness.

The market-cap and equal-weight indexes had a hot start after the election but stalled for the last three months and have begun to roll over now.

Given these macro headwinds, volatility is expected to stick around. Canada and China retaliated against Trump’s tariffs this afternoon. Then, Commerce Secretary Howard Lutnick suggested a compromise could be in the cards.

Navigating this uncertainty is difficult for business leaders, investors, politicians, and consumers alike. We’ll have to wait and see if the market’s late-day bounce sticks, but right now, retail sentiment suggests many remain in defense mode until some of these macro headwinds dissipate.

2. Europe’s outperformance is statistically rare and, of course, completely unexpected.

The European benchmark has outperformed its US peer by 10 percentage points over three months. Even more surprising is that the European market has been almost entirely immune to the selloff in US stocks in the past 10 days.

“Europe decoupling is unlikely to persist if US growth falters and trade war escalates,” say Barclays strategists led by Emmanuel Cau. “So if the recent growth scare in the US morphs into recessionary fears and pushes US equities lower, higher beta European equities are unlikely to be immune.”

The strategists note cyclicals and banks in particular have led Europe higher, but are typically macro-sensitive. Cyclical stock valuations have become extended, while positioning on banks is stretched, as these have been the favored vehicle of global investors to gain exposure to the continent, they say. Now they think tariffs are a significant threat.

While further European gains are at risk, the region could still keep its lead. The US market remains heavily concentrated in tech, and the hype surrounding artificial intelligence is showing cracks.

By contrast, Europe is more diversified. A stellar rally in banks means financials now account for 22% of the Stoxx 600, versus 12% for the S&P 500. Tech is 36% of the US benchmark, but only 8% of its European counterpart. “The US equity market has struggled in the global stocks race this year, and a large part of the blame may fall on the Great Rotation’s turn away from technology and toward financials,” say Bloomberg Intelligence strategists Gina Martin Adams and Gillian Wolf. “US equities tend to outperform international peers when investors favor tech stocks over financials, making tech’s recent malaise a risk for the globe’s biggest equity market.”

3. Europe’s big defense bet.

Half of the top 10 performing stocks in the Stoxx 600 this year are defense stocks, and appetite for the likes of Rheinmetall, Thales and Leonardo is showing no sign of abating.

The latest military spending commitments from European leaders to support Ukraine have boosted valuations to fresh record levels, with the sector now trading at a 60% premium to the broader market. “European countries have already committed to very large defense spending increases and this may accelerate further,” says UBS strategist Gerry Fowler. “The stocks have moved a long way to reflect this accelerated growth but while upward revisions continue, investors won’t worry too much about valuations.”

Even the prospect of a cease-fire in Ukraine barely paused the rally in the sector earlier this year. Now Europe’s leaders are rushing to boost the region’s defence capabilities amid concerns of a US pullback following a fallout between US President Donald Trump and Ukraine’s President Volodymyr Zelenskiy.

The pledges are in addition to ongoing discussions about a German special defense fund. The major market question mark going forward will be about earnings. Soaring valuations won’t look as expensive if analysts follow up with earnings upgrades — which has been the case so far. “With over €150 billion potentially flooding into European defense budgets and arms contracts escalating, the sector is entering a structural bull cycle,” says Alphavalue analyst Saima Hussain.

“The message is clear: defense is Europe’s next big bet.” “Defense could see some bouts of profit taking, but we recommend staying structurally long the sector,” say strategists from JPMorgan. “European countries will need to keep increasing their defense spending, and direct the orders to European champions.”

4. “Buy pullback in Nvidia stock as AI trade worries are “premature”, says Bernstein.

Nvidia plummeted, with the stock now trading at approximately 25x next twelve months (NTM) earnings, the weakest in a year and near a 10-year low.

According to Bernstein, this de-rating is "a little stunning," especially at the start of a product cycle. The firm highlighted that Nvidia’s Blackwell product revenues of $11 billion all shipped in January, signaling that supply constraints are easing and demand is expected to exceed supply in the coming quarters. Additionally, capital expenditure numbers from Nvidia’s customers continue to rise.

Also, “it is becoming increasingly clear that DeepSeek is not doomsday for AI demand,” analysts added. While regulatory risks loom, with AI diffusion rules set to take effect in May and potential further bans in China, Bernstein points out that Nvidia’s sales in China, although at record levels, represent the lowest percentage of revenue in the last decade.

Historically, buying Nvidia stock at 25x earnings or lower has yielded a significant return, with limited downside risk. “We could soon be so back,” analysts concluded, reiterating an Outperform rating and the price target of $185 on Nvidia stock.

5. How expensive is electricity really?

As electricity prices are shaped by local wages, taxes, and policies, they're a key indicator of economic strain on households.

On the lower end of the scale, Northern Europe benefits from cheap electricity both in absolute and relative terms. Thanks to abundant renewable energy, strong grid infrastructure, and self-sufficiency, Oslo, Helsinki, and Stockholm spend a small share of their income on electricity.

Meanwhile, at the more expensive end, Berlin tops the list for absolute electricity prices, driven by high grid fees, renewable energy investments, and reliance on imported natural gas as Germany moves away from coal and nuclear.

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