The Global Reset Trade
164 Monday, 12 January 2026 16:12
Divergent Opinions in External Articles - The opinions expressed in articles from external sources do not necessarily reflect the views of Renalco SA and are shared for informational purposes only.
Dear readers, we hope you had a good break, because 2026 is going to be anything but quiet. Trump is all fired up, omnipresent, with the mid-terms on the horizon at the end of the year and the memory of the defeat in 2018. He wants to bring the oil price down, which is tantamount to a tax cut for citizens. This is compensation for the adverse impact of trade tariffs on households’ purchasing power. He hopes this strategy will bring down inflation, which contributed to the Democrats' defeat in 2024, and secure his majority. He also needs to move fast because opinion polls are reflecting disapproval of his economic policies. The next shoe to drop could be the Iranian regime, though betting on change in a country of 90 million people without a credible alternative is highly challenging. Overall, if 2025 was about trade tariffs, 2026 now appears poised to upend the world order.
We identify three areas that may benefit from Trump’s multiple initiatives on the international front, despite the fact that they may be controversial:
- First, US oil equipment & services companies are likely to make the most of the new paradigm in Venezuela, while the outlook for US big oil companies is more mixed. US oil companies will face a trade-off between lower oil prices versus more ample reserves. But the US energy sector suffered from falling oil prices in 2025 and is the most attractively valued among sectors, according to our proprietary model.
- Second, Trump’s insistence with regard to taking control of Greenland, his objective to increase the defence budget, and Russia’s persistent threat, are boosting the defense theme. At some point in Q4, it was impacted negatively by the potential conflict resolution in Ukraine. But rising evidence that conflict resolution will not remove the Russian threat, and the recent developments mentioned above, are likely to further fuel the theme going forward. Our global defence basket is on fire and has reached new highs in recent weeks.
- Third, irrespective of whether the US will use military force in Greenland, the fact is that such pronouncements are further reinforcing the European sovereignty trade. We revisit the theme that we launched last summer of leveraging the Draghi report on European competitiveness and sovereignty. As we show in the weekly, the Draghi report involves three core areas of focus, namely closing the innovation gap, decarbonising the economy, and reducing dependencies. These were then structured into five key areas: defence and security, digital autonomy, access to raw materials, energy independence & productivity, and secure health care and food. Benefitting from the input of Kepler Cheuvreux’s equity analysts, our strategy identified three top conviction stocks for each area, leading to an initial 15-stock equally weighted portfolio. Less than six months after its launch, the strategy is living up to its promise: up +20% versus +10% for the benchmark (Stoxx Europe 600).
Finally, if tensions around Greenland were to escalate into a full-blown conflict, we believe the USD could come under renewed pressure. While the initial market reaction would likely support the dollar through a risk-off stance, we would expect this to be short-lived. The de-dollarisation theme could reassert itself, with European (and global) investors accelerating efforts to reduce their USD exposure and reallocate portfolios towards alternative assets (like gold). Such dynamics would weigh on those European equities that are most sensitive to a weaker dollar. In addition, European companies with significant US exposure could face heightened vulnerability and volatility, as renewed pressure from the Trump administration cannot be ruled out (e.g. Novo, a key Danish heavyweight).
- Against this backdrop, we present a screening of large-cap European stocks based on: 1) the highest share of USD-denominated profits; and 2) the highest proportion of profits generated in the US.
- Yet, this is not our central scenario, as we do not expect the EU to get into a big fight with Trump, and believe the legal/diplomatic avenue will continue to be favoured.
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