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WisdomTree Insights
Escalating Russian incursions and Germany’s new shoot-down authority for hostile drones are turning Europe’s grey-zone pressure into funded programmes. WisdomTree Europe Defence UCITS Index’s rebalance adds eight companies across space communications, counter Unmanned Aerial Systems (UAS), seabed security and protection. Backlog conversion underpins double-digit earnings per share (EPS) growth, pointing to gradual multiple compression.
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Escalating Russian incursions and Germany’s new shoot-down authority for hostile drones are turning Europe’s grey-zone pressure into funded programmes. WisdomTree Europe Defence UCITS Index’s rebalance adds eight companies across space communications, counter Unmanned Aerial Systems (UAS), seabed security and protection. Backlog conversion underpins double-digit earnings per share (EPS) growth, pointing to gradual multiple compression.
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Japan has a new political anchor and a clearer economic path. The Tankan shows demand holding. Trade frictions look manageable. The Bank of Japan is edging toward normalisation without choking growth. Corporate reform is turning cash into returns. In this mix a currency hedged tilt to global exporters offers targeted access to earnings resilience with less currency noise.
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Europe’s rearmament is accelerating, with German leaders Rheinmetall, HENSOLDT, and RENK central to fixing bottlenecks in ammunition, sensors, and mobility. For investors, multi-year European Union and NATO commitments create durable spending visibility.
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Europe’s defence sector is entering a phase of structural, long-term investment backed by the European Union, North Atlantic Treaty Organisation (NATO) and national commitments. This shift supports spending visibility, industrial consolidation and cross-border collaboration. Companies with niche capabilities are well positioned to capture this opportunity.
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Corn prices have stabilized above $4 as the USDA’s latest monthly report cut yield estimates but raised exports to a record 3bn bushels, reflecting strong early-season demand. Despite record acreage, the balance is tightening slightly. If yields dip further and export strength holds, prices could trend higher.
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H1 2025 revealed uneven equity risk premia, with the US offering low valuation buffers amid tariff uncertainty, while Europe, Japan, and Emerging Markets (EMs) present higher equity risk premiums (ERPs) and stronger macro tailwinds. Investors may benefit from a barbell approach, holding US innovators while shifting capital to undervalued, high-premium regions where risks are better priced in.
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