Sentiment is very bullish with risk appetite above 1, driven by AI capex and falling inflation expectations from Middle East peace hopes. However, higher-for-longer rates or a Fed hike would raise capital costs and risk premia for equities. UK fiscal sustainability concerns persist globally, and any change in central bank mandates could shift bond and currency dynamics.

KKR remains optimistic on Europe despite political instability, seeing it as the second-largest economy needing change. Private equity offers exposure to exciting sectors (tech, space, defense) not well-represented in European public indices, with ability to affect change patiently. The theme of sovereignty and critical infrastructure investment in Europe will play out over years, requiring public-private partnerships.

Climate change is a structural investment trend, not a temporary shock. Grid investment in Europe will exceed $1 trillion over 10 years due to aging infrastructure, weather, and demand from AI data centers and electrification. Nuclear, solar, and storage are key. The biggest risk is maintaining the status quo. Middle East and Southeast Asian investors are going full steam ahead on transition for energy security, not just decarbonization.

OpenAI's IPO delay to protect a $1 trillion valuation raises concerns about funding massive AI expansion, especially as cash burn hit $38B last year. Apple's 20% price increase on core products signals even the biggest purchaser is losing pricing power, which may weigh on demand for the iPhone 18 and the entire tech ecosystem.