Leading global financial institutions are revising their targets for European stock indices upward. Analysts expect the upward trend in Old World stock markets to continue, despite ongoing geopolitical risks.
After a volatile first half of the year, the European stock market has not only fully recovered its previous losses but also reached new all-time highs. On July 3, the Stoxx Europe 600 index hit another record at around 652 points. Currently, the indicator has corrected to 639 points, but the total return since the start of the year exceeds 7%. The easing of tensions around Iran, thanks to a ceasefire agreement, has revived the upward trend.
UBS strategists have raised their target for the Stoxx Europe 600 from 630 to 690 points, forecasting an 8% increase by the end of this year. The bank expects the rally to continue into 2027, with a forecast of 760 points for that period—a 19% rise over the next year and a half. UBS's 2026 forecast is higher than JPMorgan's (680 points), which previously offered the highest estimate. Bank of America, Deutsche Bank, and Kepler Cheuvreux have also raised their forecasts.
Analysts highlight stronger dynamics in the segment related to artificial intelligence, stable revisions of bank indicators, and reduced pressure from defensive sectors.
Strategists' views on the future scenario diverge
In a July survey of 18 strategists, the average expectation is that the index will rise to 647 points by the end of 2026. This is less than 1% above current levels, but the number of "bearish" forecasts is decreasing. Only 5 out of 18 respondents believe the index will decline by the end of the year, 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 follows: strategist Roland Kaloyan forecasts a correction of about 6% to 600 points. According to him, high expectations leave no room for disappointment—any deviation from them could negatively impact market dynamics.
"The main risk, in our view, is not the absence of profit growth, but that the recovery will be weaker than the expectations already priced in," Kaloyan explained.
The next test is the second-quarter financial results. Forecasts have already been exceeded by more than 45% of companies, while 27% reported worse-than-expected results.
My comment as an analyst: The market is clearly pricing in a "soft landing" scenario for the economy and continued corporate profits. However, I would note that the consensus forecast for the end of the year (647 points) is extremely close to current levels, indicating a high degree of uncertainty. The main risk is not a lack of growth, but that it is already factored into prices. Investors should closely monitor second-quarter reports: they will be a key trigger for further movement.