Leading global financial institutions, including UBS and Deutsche Bank, have significantly revised their forecasts for the Stoxx Europe 600 index upward. Analysts expect the index to rise by 8% to 690 points by the end of 2026. This move reflects growing confidence in the resilience of corporate profits amid easing geopolitical tensions.
The European stock market has shown an impressive recovery after a volatile first half of the year. On July 3, the Stoxx 600 index hit an all-time high of 652 points. Although a subsequent correction brought it down to 639 points, the year-to-date return exceeds 7%. A key catalyst was the ceasefire agreement in the Middle East, which reduced geopolitical risks and reignited the upward trend.
Details of the New Forecast
UBS strategists Gerry Fowler and Sutanya Chedda raised their target for the Stoxx 600 from 630 to 690 points. This is the highest estimate among major banks, surpassing JPMorgan's forecast of 680 points. Moreover, UBS expects the rally to continue into 2027, setting a target of 760 points, implying a 19% increase over the next 18 months. Deutsche Bank and Bank of America have also joined the bullish consensus, raising their forecasts.
Analysts note that the growth drivers are not only macroeconomic stability but also strong momentum in the technology sector linked to artificial intelligence, steady revisions in the banking sector, and reduced pressure from defensive industries.
Consensus and Risks
A July survey of 18 strategists showed that the average forecast for the index at the end of 2026 is 647 points—just 1% above current levels. However, the number of bearish forecasts is shrinking. Only 5 out of 18 respondents expect the index to decline, and just two predict a drop of more than 5%. The most pessimistic are analysts from TFS (target 585 points) and Societe Generale (600 points).
"The main risk, in our view, is not the lack of profit growth, but that the recovery may be weaker than the expectations already priced in," warns Societe Generale strategist Roland Kaloyan. He emphasizes that high expectations leave no room for disappointment, and any deviation could negatively impact market dynamics.
The next key test for the bullish scenario will be the second-quarter earnings season. So far, over 45% of companies have beaten profit forecasts, supporting optimism. However, 27% have reported worse-than-expected results, reminding us of the fragility of the current rally.
My analysis: The consensus is certainly tilted bullish, but the range of forecasts from 585 to 690 points indicates high uncertainty. The market has already priced in many positive expectations, and further growth will require not just good, but outstanding corporate results. Any hint of an economic slowdown or a return of geopolitical risks could trigger a sharp correction.