Davos 2026: Reinforcing the Case for European Real Assets and Strategic Equities
30 January 2026
Key takeaways
- Global leaders’ discussions at Davos pointed to a broad recognition that strength and hard power are becoming essential in the current global environment
- For European equities, this backdrop underpins our view that 'hard assets' may attract a market premium
- We think current areas of genuine European leadership are in industrials, semiconductors and other hard assets
We believe the 2026 World Economic Forum (WEF) in Davos clearly supported our view that hard power and leveraging hard assets are increasingly critical in the new geopolitical reality. Against a backdrop of rising geopolitical tension and economic coercion, global leaders consistently emphasised the need for strategic autonomy, industrial strength and security of supply. For European equity markets, this rhetoric matters: it reinforces the structural re-rating potential of real asset-heavy sectors and strategic industries - notably Aerospace & Defence, energy infrastructure, industrial capital goods and critical technologies (ie, those essential for security, economic strength or industrial supply chains, like chipmaking equipment, power grid technology and industrial automation) where we believe Europe remains highly competitive on the global stage.
Merz and Macron: Re-anchoring Europe on Hard Power and Industry
German Chancellor Friedrich Merz was explicit in his diagnosis, warning that the world is moving decisively into an era of “great-power politics” where “strength, pressure and force” are once again central. In our view, his call for Europe to enhance competitiveness, rebuild defence capacity and reduce external dependencies directly supports the investment case for European Aerospace & Defence champions, defence electronics and industrial suppliers embedded in sovereign re-armament and security programmes.
French President Emmanuel Macron echoed this message, stating that Europe must “prefer respect over bullying” and defend the rule of law against economic and political coercion. His rejection of tariffs and territorial pressure as negotiating tools underscores why Europe is accelerating efforts to protect strategic supply chains and industrial capabilities. For European equities, this translates into sustained policy backing for defence platforms, energy infrastructure, grid investment and advanced manufacturing - all capital-intensive, real-asset-linked sectors with high barriers to entry.
Trump: A Catalyst for European Strategic Independence
President Donald Trump’s Davos remarks reinforced the risks of over-reliance on external partners and underscored the current US administration’s emphasis on economic sovereignty and transactional diplomacy. At the World Economic Forum (WEF) , Trump argued that many Western economies were “not recognisable … in a very negative way,” suggesting that years of conventional policy had weakened key partners.
Behind the headlines, US Commerce Secretary Howard Lutnick - speaking on behalf of the administration - framed this stance in stark terms. In his Davos address, Lutnick declared that “globalisation has failed the West and the United States of America,” arguing that past approaches which offshored production and prioritised low-cost labour had hollowed out domestic industry and left workers behind.
For European equities, we are firmly of the view that this environment favours companies aligned with domestic and regional demand, particularly those supplying governments and critical infrastructure rather than relying on global trade flows alone. We believe that Aerospace & Defence sits squarely within this trend, benefiting from rising European defence budgets and long-dated procurement cycles largely insulated from short-term economic volatility.
Carney: Today's environment is a 'rupture, not a transition'
Canadian Prime Minister Mark Carney arguably articulated the most direct framework for equity investors, describing today’s environment as a “rupture, not a transition”, where supply chains, finance and trade are increasingly weaponised. His warning that “if you’re not at the table, you’re on the menu” underscores the imperative for Europe to build scale and resilience in strategic sectors.
For European equity markets, this reinforces our view that real assets and strategic industries should command a higher structural valuation: defence systems, energy networks, industrial automation and critical technologies are no longer optional - they are essential. These sectors benefit from visibility of demand, political support and pricing power, all of which are increasingly scarce in a fragmented global economy.
Conclusion
We believe Davos 2026 did not introduce a new narrative - it helped to amplify an existing one. In the coming years, Europe’s relevance in a fractured world may depend less on soft power and more on its ability to deploy capital in industry and strategic assets. For investors, we think this strengthens the case for European equities exposed to Aerospace & Defence, energy infrastructure and industrial real assets, where Europe remains globally competitive and structurally supported.
In this context, European equity markets are not being left behind — they are being reshaped.
In a new global landscape where hard truths can necessitate hard power, we see secular forces appearing to drive Europe’s strategic champions across key industries potentially warranting a ‘sovereign premium’.
Tom O’Hara, Jamie Ross and David Barker manage European Equities strategies at GAM Investments. You can find out more information on the team and the strategies they are responsible for here.