Analysts at one of the world's leading banks, UBS, have revised their forecast for the pan-European Stoxx 600 index upward. The new target is 690 points, implying growth of approximately 8% from current levels by the end of 2026. This is a bold statement that sets a bullish tone for the entire market.
Fundamental Drivers of the Rally
The forecast upgrade is not merely a speculative move. UBS sees sustained growth in corporate profits that will support the upward trend. After a volatile first half of the year, European indices have not only recovered their positions but also hit new all-time highs. In early July, the Stoxx 600 reached around 652 points, and although a slight correction to 639 points followed, the total return since the start of the year exceeds 7%. A reduction in geopolitical tensions, particularly regarding the situation with Iran, has added confidence to the market.
UBS vs. the Rest: Who Sets the Bar?
UBS's new target of 690 points for 2026 has proven to be the most ambitious among major players. For comparison, JPMorgan set the bar at 680 points. Bank of America, Deutsche Bank, and Kepler Cheuvreux have also joined the chorus of bulls, raising their estimates. But UBS has gone even further: their forecast for 2027 stands at 760 points, implying growth of 19% over the next year and a half. The bank's strategists, Gerry Fowler and Sutanya Chedda, are confident the rally will persist, fueled by strong momentum in the artificial intelligence sector, stable revisions of banking indicators, and easing pressure from defensive sectors.
Consensus is Optimistic, but Skeptical Voices Remain
The overall market sentiment is clearly positive. In a July survey, 18 strategists on average expect the index to rise to 647 points by year-end, just 1% above current levels. Notably, the number of "bearish" forecasts is shrinking: only 5 out of 18 respondents anticipate a decline, and just two expect a drop of more than 5%.
However, not everyone shares the unbridled optimism. The most pessimistic forecast comes from TFS, which expects a 9% decline to 585 points. Societe Generale strategist Roland Kaloyan warns of a possible 6% correction to 600 points. His argument is worth noting: "The main risk, in our view, is not a lack of profit growth, but that the recovery will be weaker than the expectations already priced in." This is a classic trap for markets overheated by expectations.
Expert Opinion: While UBS and other giants set a bullish trend, investors should remember that the market has already priced in a lot of positivity. The key test will be the second-quarter earnings season—if companies fail to meet elevated expectations, the correction could be deeper than optimistic forecasts suggest. Keep an eye on the dynamics of the AI and banking sectors—these drivers are currently shaping the framework of the European rally.