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Guys, for the first time guests will be today, super excited to get into this conversation.
From the October lows, the MSCI EFA index is up about 20%. The S&P is up closer to 14 over the same stretch, but year to date, EFA, we call it EFA, on the street, is up about 8% versus 4% for the S&P, merge markets are up as well. A lot of the Mac 7 means peak months ago, though, and they either stole their pullback, and it's taken a lot of the oxygen out of the US stock versus international stock story.
At the same time, the US dollar index is also down.
“I don't think it's a one-month rotation, I think it's bigger than that.”
Most investors are explaining it away with the standard playbook, they'll say, "Well, the stocks for cheaper, or the dollar is weak, or it's mean reversion, because US stocks have dominated." But Matt Tautrell thinks that misses the real story. Matt is the CEO and chief investment officer of Tautrell Capital Management. Matt has built a reputation for pioneering high-profile ETFs and was instrumental in the launch of single stock ETFs in the US. He's also a frequent guest
in the financial media. This is his first time here on the compound.
Matthew, welcome. Thanks for joining us. Hey, thank you very much for having me. So, you wrote this thing where we're talking about Europe specifically, and you talked about the market missing the bigger story with this international stock out performance, and part of what you were saying was the Europeans are working on a kill switch.
And I wanted to start there and then we can get a little bit broader, but for people that didn't
“weed your piece, what is the European kill switch, and why should investors pay attention to it?”
Yeah, and as you said in the beginning, people are missing the boat, but they're also missing the boat just jumping into international. You've got to be thematic, you've got to understand kind of the dynamics going on. So we did right after Trump got elected, we did EUD, European aerospace and defense, figuring that the European countries were going to have to spend in their own companies for their own defense. We see digital sovereignty is a lot similar to that.
We've seen that if you're relying on somebody else for your own defense, that's a problem. If you're relying on somebody else for energy, that's a problem. Digital sovereignty to us is the same thing. So you've got this arms race going on between the US and China on AI, and everyone's kind of forgetting Europe, and Europe is sitting there saying, you know, hey, we don't want to be
“reliant just on the US. We want to start bringing in our own companies. So that's what we're talking”
about. Okay. So the Europeans in Internet 1.0, they spent most of that time allowing US-dominant technology companies to come in companies like Microsoft, etc. We sold our PCs there. We sold software there. We handled the build out of their websites, like we were the dominant player. Then the cloud computing era gets underway. Let's say 2015, 2016. It's mostly the European cloud computing is US cloud computing. It's mostly the same
Companies.
attention regulating. This time, they don't want to play the same game, and they want to actually
have native, I mean, how realistic is it for the Europeans to ever be able to kill switch our stuff, turn our stuff off, and light their stuff up. They're they're not there, but you're saying like that's where things are are headed, and you're saying the proof of that is look what's happening with the European defense stocks, all of a sudden they want to make missiles. Yeah, and that's exactly it. I mean, there's not a European mag 7. There's not a European
“NVIDIA. You know, they still are going to need us, but what I think you've got as a couple”
of things, you've got a political situation where our leaders and their leaders are not necessarily
agreeing, you know, a situation where, you know, we've got a president who's maybe not doing things the way other presidents did and is unpredictable, and you know, that they want as much in your seeing it where, you know, France came out and said, hey, we want to get off teams, we want to get off Zoom. So they're only going to be able to do it to an extent, but you know, when you look at and you're talking about, you know, hey, people are investing internationally, to us, you've
still got to be themematic there. Where are the areas going to be? And if you look, and I'm an ETF guy,
but I think a lot of these internationally, TFs leave a lot to be desired, because what you're
getting is a lot of financials, and, you know, not that much tech, I would rather say, you know, I want to be concentrated in areas, digital sovereignty is one. Okay, so when you buy a developed market international stock ETF, you're not, you're not going to be able to capture this theme, unless it's like sort of a re-weighting in the multiple, which is sort of what we've had so far, like a rising tide, lifting all of those stocks. But like, if you really want to play into this
idea of the Europeans getting serious about their own defense, their own platforms, their own digital,
“what do you do? Like, let's say somebody agrees with what you're saying, then what?”
Yeah, I mean, for digital sovereignty, there is no ETF yet. Okay. So you may be, what are you so busy doing all this time? I mean, we're filing for a whole bunch of stuff. I don't know if that halo thing was your idea, but we just filed for that on Friday. Yeah, no, I'm going to sue you guys for that. We could talk about that later. But so like, what is the person who says, you know, what I agree, it really does seem like, this is what you said, international and emerging
market equities have been outperforming in United States, most investors are explaining it away with lazy narratives. Then you said the main event is this, the world building optionality away from US policy and platform dependence. And once you see it, you can't unsee it. So some of the biggest winning stocks that I've seen internationally, or like what's Ryan Metal is a German munitions maker. Like, I am seeing that start to really go, like all of those stocks are doubling
tripling. So I would love to figure out what's the trade on this. I don't want to see more belligerent Europe, but like this Europe that's starting to feel itself. Yeah, there are tough. Yeah, well, there are some ADRs for the European digital sovereignty. There's Cap Gemini. I mean, everyone knows ASML and SAP. Right. Dorich, Telecom, Ericsson, Infyan, you know, net nebias is one
“that I think a lot of people know. So there are some stocks. There's not a lot on the ADR side,”
but, you know, there's probably about 10, 12 names that you could go into on the ADR side until someone decides to do an ETF for it. Okay. A lot of people over this weekend, when they looked at the invasion, the bombing of Iran and the decapitation of the power structure there and who knows where this will go. But a lot of people look at that and they connected the dots to what we did in Venezuela. And the reason why that's potentially meaningful, not just for investors, but also
for investors, is that Venezuela and Iran were the primary suppliers of oil to China. And again, we have no idea whether or not Iran will be selling oil today tomorrow, who they're selling it to. So, but just people looking at that and saying wait a minute, is this whole thing like a checkmate to China, cutting off its client states that we're supplying it with oil.
So now this sort of does become like a macro challenge or puzzle to figure ou...
the political ramifications. Can you talk a little bit about that idea and where China plays into
“the whole digital sovereignty thing in addition to the energy dependence issues?”
Yeah. And the thing that the Trump makes interesting with the markets is a lot of stuff is art of the deal. So, you know, we don't know why did he invade Venezuela? Why did he pull Maduro out of Venezuela? Why is he bombing Iran? We hear the story, but you've figured there's a lot more to it. China, as far as AI, physical AI, is going to be a huge player. There, you know, the butt, you've got the bobb as the buy-dos. Those are typical ways to play
a K-wab and ETF. No one yet has done a Chinese specific humanoid robots, what they're doing on
robots is interesting. They're also ahead of us in a lot of areas. So, I do think China is
“someplace that you cannot ignore when you're investing globally. But again, I think you focus,”
just buy a China ETF. You want to focus on the AI stuff. You want to focus on the robotics stuff. A China, a China tech ETF will get you much further down that road. Yeah, those will come, but you start further down that road than like an FXI. Yeah, I agree with you. I agree with you. It'll help you express that major theme. You've said that a US China trade fight is increasingly a third-country game.
The market is slowly waking up to something that central banks and policy makers have been talking about more explicitly. When trade barriers rise, trade doesn't disappear, it rerouts. That means relative winners and losers shift across European Union, E.M. Asia, Latin, and selected connectors. So, if you're investing internationally in this day and age, what is the big takeaway
“do you think for investors? Yeah, so I think it is themeatic and sticking with today”
and tomorrow's top themes. AI is a game changer in so many different ways, but now it's beyond just
hey, buy, Nvidia, buy some infrastructure, buy some cooling. There's so much more going on, like the European digital sovereignty, like a Chinese robots. You're going to see opportunities in emerging markets on the digital side as well. Not nearly as many, but you want to look at and you want to look at those dislocations. You know, the winners, the losers, the halo idea. There's so much now going on beyond what was going on last year where it's just like hey,
buy AI and forget about it. Do you think the international stock outperformance can continue throughout the course of 2026? I think it can. I mean, but at the end of the day, you don't ignore the US. I mean, we said it at the beginning. The real winners are still here. None of this happens without Nvidia. You know, you look at all the kind of key and we do a lot of thematic research. You look at all today and tomorrow's top themes and figure out who the winners are.
It's still one or more max seven names. So, you know, it's a rotation. You certainly want to be over there, but you don't want to ignore the US. A lot of investors have just forgotten that these markets exist. I think on the financial advisor side, we've probably done a better job than average continuing to build global diversification into our portfolios, but even on the advisor side, there's a lot of advisors just like after 10 years. Just got sick of explaining themselves to their
clients. Sick of saying they're sorry every year that the S&P was lapping the EFA and the EEM. But I still think like advisors are better than average. Certainly versus retail, but now retail is starting to we discover that these other markets exist and that they can't outperform. And I think that that's the big shift that's happening now. And my guess is this kind of thing is probably not a six month phenomenon. I think once this starts, people just start to learn the companies,
learn the tickers of the ETFs. And it could have three years, five years in it. And it's exciting to me because it's boring to watch the S&P just beat everything every year. And that didn't
Happen last year.
But the thing I would say is again, you've got to be thematic. I wouldn't just say,
all right, I'm going to buy an emerging market ETF, I'm going to buy an ETF, check the box, I've got that exposure. You know, there's so much going on like, you know, aerospace and defense, what we saw that doing last year. You know, if you're just buying a European ETF or an ETF, you're exposure to that theme is, you know, minimal if any. So I still think you've got to be thematic over there. But yeah, I mean, I agree. I don't think this is just the, you know, one hit
wonder. You laid out two different themes. One is Europe's next buildout. And we talked about that defense, digital sovereignty, European aerospace, those stocks have already gone up a lot. And
maybe they'll keep going. But that that theme has been proven. The second theme, it seems a little
bit squishier or more difficult for an investor to put their finger on the opportunity. But you're talking about the Euro stack. So you say Euro stack is the blueprint, even if the first versions are clunky, if defense is Europe's hard power rebuild, Euro stack style thinking is the soft power rebuild. A push toward a European controlled tech stack across compute cloud security and apps. It's not European SaaS. That's not what you think this is going. You listed four areas
where the winners will be compliance required procurement lanes, regulated data environments, defense and civilian crossover, meaning security, comm satellites, and then integration slash implementation. Do the products yet exist for a one-click investor. It's being able to do that. Would you try to build a basket like this utilizing AI going on the public platform. For example, they've built an AI that allows you to express a theme and they will populate it with stocks.
“Like what would you do if you were trying to gain exposure to that Euro stack theme, that concept?”
Yeah, and you're right. It's not as clean as aerospace and defense. You've got specific defense companies in Europe. They're getting money earnings go up stock price goes up. But like I said before, they're 10 to 12 ADRs that you could invest in, enough liquidity for an individual investor,
doing best in them. And yeah, you can use AI to help you do that. I mean, you know, it's an amazing
tool. You know, use it. And you could create a nice little basket of these names. You know, hopefully sometimes soon there will be a one-click ETF because I do think you all want to include the locals. And, you know, they're not all there as far as I've been able to see
“in ADRs. I'm going to real love some of these names because I think for our viewers and listeners,”
they're probably unaware of most of them. And maybe you could react to some of these or tell us how these made your list. So on the Europe defense and aerospace story, you've got Airbus, which is obvious, BAE systems, Ryan Metale, if I'm pronouncing that right. Yeah, Leon Leonardo, Sob fails and disult aviation. One of you tell us about those and then we'll, and then we'll look at the digital sovereign two names after. Yeah, and in those are all very clean, like, you know,
the Lockheed Martens, the Raytheons of Europe. That's where the money's going. One of the things that we tried very hard to do when we're constructing ETFs is we want pure play. So I get a lot of pushback on EUAD because we've, oh, it's so concentrated. It's like, look, I could put 40 names that get 10%
“of the revenue from defense spending if you want to feel more diversified, but I'm not going to”
do that. I want to create a product that I want and those are the key names where the money is going, better building the products that the European countries are looking to build for their own defense. Right. So that fund EUAD, European Aerospace and Defense, how long before the domino started to fall, where people started to realize what you guys had realized was going to be like investible. How long did that take from the launch? I mean too long. We launched it right
after Trump got elected because to me, this was the obvious Trump trade and I was pounding the
Table for it and really it was it was up 70% and then all of a sudden everyon...
I want to buy this food. You should have been listening to me 70% ago. Yes, but they needed to see
“the 70% in order to believe. It is it is it is. It is when when you're early, you know, we we just”
launched, you know, a UFO disclosure ETF, way early on that. I'm pounding the table that, you know, that that's going to be an area you're going to want to be in. No one's going to listen to me on that either. Is what I don't think I could follow you into that one. All right, digital sovereignty, the plumbing. So you say these are like cloud, telco, integration, boring, quote, boring, but mandatory. These are your examples of sovereignty adjacent beneficiaries, OVH cloud, IO, NOS, orange, which is pipes
and government relationships, doiged telecom, which is pipes and public sector relevance,
and cap Gemini, which is like a migration integration player, as companies are forced switch from an American provider to European provider, cap Gemini will get some of those workflows than some of the space and satellite stuff. You tell us that and SES. I don't, I barely know any of those companies. So why do those make the list and why do you think investors will get the benefit of those working in this new world that you described? Yeah, and again, none of these
are available in the video. What you get in Europe is you get telecom, you get cloud, you get kind of the business services, and there's a little bit of semi-conductors there. SML, most notably. SML, STM. You just have arm, but that's. Yeah, I mean, in thinnions, another one. So, you know, there's not a lot there, but those are the names that are there, and you know, so they're the ones that are best positioned to get these dollars if they flow out of the US companies into the European
companies. You know, when you're replacing teams in Zoom, you know, you're replacing them with some sort of network made by one of these companies. Which US stocks the most susceptible to
“you being right about this? I think probably Zoom. Okay. Which got destroyed last week. I didn't”
even see it. I've been in it out of that stock for years. I didn't even see what happened last week today. Yeah, I didn't see what happened last week either. I think they've got a large stake in like anthropic. And that could have been it. Don't quote me on that. But oh, anthropic is on the Trump administration's shit list. Yeah, yeah. So that could be it. Or that could be part. I mean, a lot of tech stuff got destroyed. So we're going to be in a bunch of it. Do you worry about the
Google's Cisco's and Microsoft's? They're much larger than Zoom. They're much more entrenched in Europe. Do you think that those companies are susceptible to some sort of like nationalist wave or they're just too important? I mean, susceptible. Yes, but also too important. You know, I'm not going to say, hey, I'm not going to own Google because I'm worried about the EU. Okay. I'm really good dealing with the EU since 2004. Right. To me, it's more I'm going to own
Google and I'm going to own the EU companies. Not I'm getting rid of Google and buying EU. Okay. All right. It's an interesting. It's a really interesting idea. Do you think they'll be a big enough market for it? That an ETF launch at some point might make sense. Or you think investors
“are better off just finding a few ticker's learning the stories and picking their spots?”
You know, I think there's probably an ETF coming for this that's going to make sense. Okay. You know, ETFs are access vehicles. You know, it's easy to have a one touch. And especially ADRs. I mean, if you don't know what you're doing, you know, it could be a massive company. The ADR might not trade well. Yeah. I think this is something crying out for an ETF. Okay. Tell us a little bit about total capital. You found it the firm how many years ago?
2012. Okay. We've been doing ETFs for 10 years. We've got a little over four billion in
AUM. Probably about 60 AD ETFs. Okay. We just branched out into wealth management as well. So we're starting to ramp up there. Okay. And you know, we like to launch thematic things before anyone's thinking of them. We like to do professional level options strategies. And, you know,
We like to do like real index exposure.
you know, do that. And then, you know, we're known for the, the levered in inverse 2x stuff as well.
“I'm a trader at heart. I like to provide products for traders. Dude, this has been a pleasure. Thank you”
so much for thank you so much for coming on the compound. We appreciate it. Where is the best place for
people to get your thoughts on a regular basis? Like, where can they follow you? Yeah, go to our website,
“titlecap.com. You can sign up for our newsletter. It's free. We write about themes every day.”
Awesome. Matthew, thanks again. Really appreciate it. Thank you.
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