Q3 EMEA Market Outlook: Inflation Signals, Sector Value, and the SpaceX Debate

Our Q3 EMEA Market Outlook webinar covered a wide range of topics, from the inflation signals supporting this quarter’s equity gains to the assumptions underpinning Morningstar’s SpaceX valuation. 

Below, we recap the questions investors asked most and the themes shaping markets heading into the second half of 2026. 

The sharp decline in US break-even inflation rates since mid-May has been one of the clearest indicators of investor sentiment this quarter. Even a move from roughly 2.7% to 2.4% suggests growing confidence that the worst of the inflation cycle, and the market disruption caused by the Iran conflict, may be behind us. 

That confidence has helped support equity markets even as the ceasefire has shown signs of strain and geopolitical tensions remain elevated. 

The risk is that this trend could reverse. Further disruption in the Strait of Hormuz, rising oil prices, or a more hawkish central bank response could quickly weaken the valuation support that has built over the past several months. 

The most compelling value opportunities remain in consumer defensive, healthcare, and consumer cyclical stocks. 

Consumer defensive stocks trade at a 12% discount to fair value, healthcare at a 10% discount, and consumer cyclicals at a 16% discount, according to our aggregated fair value estimates. 

Consumer defensive companies have been pressured by weak volumes and inflation-driven downtrading, but growth in private-label products, particularly in categories such as grab-and-go meals, remains a bright spot. 

Healthcare valuations, meanwhile, continue to reflect concerns around an approaching patent cliff. However, those fears may be overstated if new drug launches and pipeline growth offset expiring patents. 

Energy offers a different picture. Despite the sector’s strong performance over the past 12 months, there are currently no discounted opportunities across its subsectors. 

Morningstar’s valuation is based on three scenarios. 

The “moonshot” scenario assumes everything goes right: Starship becomes highly reusable, orbital AI data centers prove cost-competitive with terrestrial facilities, and the company successfully scales and monetizes that infrastructure. Morningstar assigns just a 7% probability to that outcome, despite it appearing to be close to what the market is currently pricing in. 

A more likely outcome, with a 50% probability weighting, is a “minimum viable product” scenario in which Starship is reusable but space-based data centers struggle to compete on cost, limiting market share and monetization opportunities. 

The third scenario assumes the economics of orbital data centers fail to materialize, leading the company to shift its focus elsewhere. 

Blending these scenarios results in a fair value estimate of $62 per share, well below where the stock has traded since its IPO. 

While specific trading recommendations are not given in this webinar, there are several supply-and-demand dynamics investors should watch. 

SpaceX floated only about 4.5% of its shares in the IPO, while raising approximately $85 billion overall. Its recent inclusion in the Nasdaq 100 has also created structural demand from index-tracking funds. 

At the same time, insiders become eligible to begin selling shares in early August, around the same time the company reports earnings. The first tranche of unlocked shares, about 7.3% of the company, is larger than the entire IPO float. 

That period could serve as an early test of investor appetite for the stock. 

Ground-based facilities face growing constraints, including energy costs, cooling requirements, and community opposition. By contrast, an orbital data center could potentially benefit from free solar power, free cooling, and fewer permitting challenges. 

The broader implication is that supply constraints could become an increasingly important part of the AI investment story. If terrestrial capacity struggles to keep pace with demand, alternative infrastructure models may become more economically attractive. 

Consumer confidence remains a lagging indicator. Households continue to absorb negative headlines around oil prices, food inflation, and interest rates, which have weighed on sentiment.  

However, it may not take much to improve the outlook. A more durable peace agreement in the Middle East and continued easing in inflation could help restore purchasing power as borrowing costs decline. 

Over time, lower mortgage rates and easing inflation pressures could gradually feed through to stronger consumer sentiment. 

The themes emerging from this quarter’s webinar point to a market still trying to determine how much geopolitical and inflation risk is already priced in. 

Falling inflation expectations have supported valuations even as the Iran ceasefire remains fragile. Still, that support could weaken quickly if inflation expectations reverse. 

Opportunities in Europe remain selective. Consumer defensive, healthcare, and consumer cyclical stocks continue to trade at meaningful discounts, while energy offers little valuation upside at current levels. 

On SpaceX, the message is one of caution. The market appears to be pricing in a near-best-case outcome that our analyst’s probability-weighted valuation assigns only a small likelihood of occurring. 

For advisors, maintaining a focus on valuation discipline and distinguishing durable trends from short-term market noise remains as important as ever.