Investors spent two years focused on US tech. Now the spotlight is shifting. Goldman Sachs strategist Sharon Bell says Europe "has done much better than almost everyone expected," adding that the region was overlooked because attention stayed on American giants.
Goldman has raised its three-month target to 670, JPMorgan calls for 680, UBS sees 690, and Panmure Liberum is the most optimistic at 700.
Forecasts are not guaranteed. The index has also just experienced a seven-day decline, its longest such losing run since September 2023. Annual targets can still be met even when short-term moves feel painful.
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The surrounding conditions have also turned more turbulent. Since July, oil prices have jumped 30%, and bond yields are back to levels last seen decades ago. Higher energy and borrowing costs can squeeze corporate margins. Geopolitics brings more uncertainty, with President Trump saying he plans an "economic D-Day" on Iran. Barclays strategist Emmanuel Cau warns that "equities are facing many unknowns."
Despite the recent pullback, the index remains within striking distance of its record high, supported by resilient corporate earnings and a relatively stable economic outlook in the region.
This resilience is notable given the broader context. For years, European equities lagged their U.S. counterparts, as investors flocked to American technology and growth stocks. The Stoxx Europe 600 has now outperformed the S&P 500 over the past year, driven by a more diversified earnings base and cheaper valuations. While the region still faces structural challenges, such as an aging population and slower digital adoption, its current rally is supported by improving corporate profitability and a pick-up in share buybacks.
The strongest support comes from company profits, not macro forecasts. Analysts expect Stoxx Europe 600 earnings to grow 15% this year and a further 9% in 2026. That kind of bottom-up strength can carry a market even when the headlines are noisy.
The shift is also visible in AI-related stocks. That flips the old narrative: Europe is no longer just a laggard or a value play. It is a place where individual companies are being rewarded again.
UBS's Gerry Fowler says: "Our optimism comes not from the macro but from stock-specific forecasts." In other words, this rally is not about a single red or blue wave - it is about individual businesses delivering.
You do not need to make a big regional call to see the opportunity. After a long period of US outperformance, Europe offers a market with low expectations and improving fundamentals. A four-year winning streak shows that slow, steady gains are possible even when the headlines are noisy.
Holding profit-heavy European companies will not eliminate risk. But it does change the mix. It gives your portfolio exposure to a part of the world that has been ignored for years - exactly when the overlooked companies start to perform.
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