Goldman Sachs Group Inc. and JPMorgan Chase & Co. strategists are among the most optimistic about European stocks on the back of a robust corporate earnings outlook, a Bloomberg survey shows.
Goldman strategists have raised their three-month target for the Stoxx Europe 600 index to 670 points, implying gains of about 3% from Wednesday’s close. Panmure Liberum is the most bullish in the poll, with a year-end forecast of 700, while JPMorgan sees the index climbing to about 680.
On average, 15 strategists expect the benchmark to end the year around 651 points, representing a full-year rally of about 10%, according to the survey. That would mark the fourth straight year of gains in Europe’s longest winning streak since 2015.
“Europe has done much better than almost everybody would have expected at the outset of this year,” said Sharon Bell, senior European equity strategist at Goldman Sachs. “There’s been so much attention on a handful of companies in the US and Asia that I just don’t feel Europe has had its proper due.”
The Stoxx 600 has scaled record highs as corporate earnings blew past analysts’ estimates. An improving economic outlook has also reassured at a time when US data are underwhelming, while investors have flocked to a broader swath of European stocks that stand to benefit from artificial-intelligence spending.
Market forecasters have consistently underestimated the strength of the rally. Back in December, the cohort had expected the Stoxx 600 to rise about 7% on average by end-2026, with even the most bullish target seeing the gauge at 650 points — a level it has already hit. Subsequent upgrades have only just kept pace with the index’s gains.
To be sure, strategists kept their nerve after the US-Iran war began in February, expecting economic growth to remain resilient despite a spike in oil prices. That prediction has proved correct as companies reported the strongest profit margins on record for the second quarter.
Citigroup Inc. strategist Beata Manthey said the market is also increasingly viewing European stocks as “a hedge within the global AI trade.”
The region is less reliant on heavy AI spenders — an advantage as investors question the payoff from billions of dollars in capital expenditure in the US and Asia. A Bank of America Corp. basket of European AI adopters has surged 12% this year, outperforming a 2.3% decline in the US hyperscalers.
Still, the rally faces several risks into the year end, including from lingering geopolitics and higher oil prices. President Donald Trump has announced plans to subject Iran to an “economic D-Day.” Oil has surged 30% from a July low, while global bond yields have hit multidecade highs.
The Stoxx 600 has declined for seven straight sessions in its longest losing streak since September 2023.
“Equities are facing many unknowns,” said Barclays Plc strategist Emmanuel Cau. He cited a return in political risk from the US midterm elections and budget discussions in France, as well as seasonally negative trends in September.
For now, Cau said “the path of least resistance” for stocks remains higher given continued earnings resilience. His peers at HSBC Holdings Plc also said the market has already adjusted for higher oil prices and bond yields, and so is likely to be boosted by any declines in those assets.
One contrarian forecaster is Bank of America’s Sebastian Raedler, who expects a potential increase in equity risk premiums on the back of “unresolved issues” around energy supply and US economic uncertainty. The strategist cut his already-bearish target further to 610 points, implying a drop of 6% from current levels.
For some others, though, the feed-through from AI spending as well as corporate earnings is reason enough to remain optimistic. Analysts on average expect Stoxx 600 profits to surge 15% this year and 9% in 2027, according to data compiled by Bloomberg Intelligence.
“Our optimism comes not from the macroeconomics but from our stock analysts,” said UBS Group AG strategist Gerry Fowler, who has a year-end target of 690. “Top-down forecasting is proving less accurate as earnings in stock themes power the European growth story."
