The analytical departments of UBS and Deutsche Bank have revised their target levels for the Stoxx Europe 600 index, expecting it to rise by 8% by the end of this year. The new target is set at 690 points, significantly higher than the previous forecast of 630 points. This decision reflects confidence in a sustained recovery of corporate profits, despite ongoing geopolitical uncertainty.
Factors fueling the bullish sentiment
After a volatile first half of the year, the European stock market has not only fully recouped its losses but also reached new all-time highs. On July 3, the index recorded a record high of around 652 points, although it subsequently corrected to 639 points. Nevertheless, since the start of the year, the Stoxx 600 has delivered a return exceeding 7%. A reduction in geopolitical tensions, particularly around Iran, has contributed to the resumption of the upward trend.
UBS strategists Gerry Fowler and Sutanya Chedda expect the rally to continue through 2027, with a long-term target of 760 points — implying a 19% increase over the next year and a half. UBS's forecast for 2026 turned out to be the most optimistic, surpassing JPMorgan's estimate of 680 points, which was previously considered the highest. Bank of America, Deutsche Bank, and Kepler Cheuvreux have also raised their forecasts.
Consensus and risks: bears retreat
A July survey of 18 strategists showed that the average forecast for the Stoxx 600 by year-end stands at 647 points, less than 1% above current levels. Notably, the number of bearish forecasts is shrinking: only 5 out of 18 respondents expect a decline, and just two predict a drop of more than 5%.
The most cautious assessment comes from TFS, which expects a 9% decline to 585 points. Societe Generale strategist Roland Kaloyan forecasts a correction of around 6%, to 600 points. According to him, "the main risk is not the absence of profit growth, but that the recovery will be weaker than the expectations priced in." Any deviation from high expectations could negatively impact market dynamics.
The next key test will be second-quarter financial results. So far, forecasts have been exceeded by over 45% of companies, while 27% have reported worse-than-expected results.
Expert commentary: The market is clearly overheated with expectations, and the consensus is shifting toward an "ideal scenario." However, as practice shows, periods of maximum optimism often precede corrections. Investors should closely monitor company reports — if reality fails to meet inflated forecasts, the correction could be deeper than the bulls anticipate.