Analysts at UBS, one of the world's largest banks, have revised their target for the Stoxx Europe 600 index upward, from 630 to 690 points. This implies growth of approximately 8% from current levels and signals renewed confidence in corporate profits, despite ongoing geopolitical uncertainty.
The first half of 2026 proved highly volatile for the European stock market, but it ended with a full recovery of previous losses and the setting of new all-time highs. On July 3, the index recorded a record level of around 652 points. After a slight correction to 639 points, the total year-to-date return exceeds 7%. The easing of tensions around Iran following a ceasefire agreement was a key factor that reignited the upward trend.
UBS strategists Gerry Fowler and Sutanya Chedda believe the rally in European markets will persist at least until 2027. Their long-term forecast for the Stoxx 600 stands at 760 points, implying growth of 19% over the next year and a half. This optimism is shared by other major players: JPMorgan has set a 2026 target of 680 points, while Bank of America, Deutsche Bank, and Kepler Cheuvreux have also raised their estimates. Notably, growth drivers include not only traditional sectors but also the artificial intelligence segment, as well as sustained upward revisions in the banking sector amid reduced pressure from defensive industries.
Bears retreat, but risks remain
The consensus forecast among 18 surveyed strategists as of July was more modest—647 points by year-end, less than 1% above current levels. Nevertheless, the number of "bearish" forecasts is declining: only 5 out of 18 expect the index to fall, and just two predict a decline of more than 5%.
The most pessimistic are analysts at TFS, who expect a correction of 9% to 585 points. They are followed by Societe Generale: strategist Roland Kaloyan forecasts a decline of about 6% to 600 points. According to him, the high expectations embedded in current prices leave no room for disappointment—any deviation from them could negatively impact market dynamics.
My opinion: The market is clearly overheated with expectations, and while fundamental indicators such as corporate profits look encouraging, the key risk is not so much the absence of growth, but rather the likelihood that the actual recovery will be weaker than the scenario priced in. Investors should be prepared for increased volatility in the second half of the year, especially amid second-quarter earnings reports, where only 45% of companies have so far beaten forecasts, while 27% have reported worse-than-expected results.