Contrary to typical risk-off behavior, a financial shock originating in the US would likely be positive for the EUR/USD exchange rate. This is because it creates more room for the US Federal Reserve to reprice its policy downwards and can trigger repatriation flows out of US equities.

With both US and European economies growing robustly, the direct EUR/USD currency pair is largely neutralized. A more effective strategy to gain exposure to Europe's strengthening growth is by investing in higher-beta, pro-cyclical currencies like the Scandinavian Kroner, which are less impacted by broad US dollar movements.

For the first time in a decade, European equities have broken out of their constantly widening valuation discount range compared to the US. Historically, such breakouts have signaled the beginning of a long-term upward trend where the valuation gap narrows significantly.

Contrary to the belief that US strength harms the Euro, historical data shows the EUR/USD pair performs best when growth outlooks for *both* regions are being upgraded. This is because the Euro is fundamentally a pro-cyclical 'growth currency,' benefiting from a global risk-on environment even when the US also thrives.

Historically, US earnings outgrew the world by 1%. Post-GFC, this widened to 3%. Investors have extrapolated this recent, higher rate as the new normal, pushing the US CAPE ratio to nearly double that of non-US markets. This represents a historically extreme valuation based on a potentially temporary growth advantage.

While the idea of US growth re-acceleration is driving dollar strength, it's not the only story. Recent positive surprises in European PMI data and upgraded Chinese GDP forecasts suggest broader global growth resilience. This breadth should help cap the US dollar's rally and may promote weakness against other currencies.

Contrary to the dominant narrative focused on US tech giants, data shows European banks and a global deep value approach have outperformed the 'Mag 7' over the last one, three, and five years. This highlights the importance of looking beyond popular headlines for actual investment performance.

Despite facing similar pressures like high inflation and slowing labor markets, the US Federal Reserve is cutting rates while European central banks remain on hold. This significant policy divergence is expected to weaken the U.S. dollar and create cross-Atlantic investment opportunities.

The top investment idea for the year is European equities, specifically quality stocks. This is based on a favorable combination of accelerating earnings growth, supportive fiscal and monetary policy, and more attractive valuations compared to US markets, particularly when analyzing EPS growth plus dividend yield versus P/E multiples.