Europe’s investment supercycle meets a new rate regime

Europe’s investment supercycle and stronger nominal growth are creating a durable backdrop for asset-heavy equities as interest rates return to more normal levels.

• US nominal GDP growth is above 6% according to CEIC data from June 2026, while the Q2 earnings season showed strong corporate momentum and rising earnings expectations in Europe.
• Investment demand is being driven by decarbonisation, electrification, defence spending, supply-chain resilience and the AI boom, with new spending currently adding demand before the resulting capacity becomes disinflationary supply.
• Jupiter identifies infrastructure, buildings, mobility, industrial processes, energy and resources as major investment areas, while higher rates and credit growth are supporting bank profitability.
• Asia is expected to add 1 billion middle-class consumers by 2030 and account for two-thirds of global consumption, supporting European-listed companies exposed to high-value consumer markets.
• UK 10-year index-linked gilt real yields have returned to levels seen immediately before the global financial crisis, suggesting that the 2010 to 2021 period of suppressed yields and excess savings was an unusual era.

Takeaway: The post-2021 environment should favour industrial, materials and banking stocks through stronger demand and earnings, while higher discount rates challenge quality-growth sectors whose valuations benefited from the low-rate period.