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European Equities

High exposure to value oriented, defensive, and inflation beneficiary positions provide Europe with an attractive backdrop. Additionally, ongoing monetary and fiscal policy support will help boost sentiment and provide some volatility protection. These positives could be overrun by the dislocations in local European economies and a slowdown in global growth prospects later in the year. We think both the upside and downside potential are lower than US equity markets. With relative outperformance more likely to come from shallower drawdowns rather than higher peaks, an allocation to European equities will provide diversification benefits if US markets struggle to cope with high valuations and policy headwinds.