The financial world is once again turning its attention to European markets. Major players, including UBS and Deutsche Bank, have significantly raised their targets for the Stoxx Europe 600 index, forecasting confident growth of up to 8% by the end of this year. This decision is not just about numbers, but a clear signal of a shift in sentiment within the global investment community.
UBS analysts have raised their target from 630 to 690 points, implying an increase of approximately 8% from current levels. This makes their forecast one of the most optimistic on Wall Street, even surpassing recent estimates from JPMorgan (680 points). Deutsche Bank, Bank of America, and Kepler Cheuvreux have also joined this bullish consensus, adjusting their models upward.
Fundamental Drivers: Corporate Profits and Macroeconomics
The main catalyst for this optimism is the expectation of sustained growth in corporate profits. Despite ongoing geopolitical tensions, European businesses are demonstrating remarkable resilience. After a volatile first half of the year, when the index hit an all-time high of around 652 points on July 3, the market corrected to 639 points, but the total return since the start of the year still exceeds 7%.
UBS strategists Gerry Fowler and Sutanya Chedda predict that the rally will last at least until 2027, with a target of 760 points by the end of that period. This implies growth of 19% over the next year and a half. They see the greatest potential in sectors related to artificial intelligence, stable revisions of banking indicators, and reduced pressure from defensive industries.
Bears Remain in the Minority, But Warn of Risks
However, the consensus is not unanimous. In a July survey of 18 strategists, the average forecast for the index at the end of 2026 is 647 points — just 1% above current levels. Only 5 out of 18 respondents expect a decline, and only two predict a drop of more than 5%.
The most pessimistic assessment comes from TFS, which expects a correction of 9% to 585 points. Societe Generale strategist Roland Kaloyan warns that high expectations leave no room for disappointment. As he noted, the main risk is not the absence of profit growth, but that the recovery will be weaker than the expectations already priced in. This is a classic trap for overheated markets.
My comment: We are witnessing a classic case of a "bullish" consensus, which in itself can become a risk factor. The market has already priced in a significant portion of positive expectations. Any surprise — whether weak quarterly reports or a tightening of ECB rhetoric — could trigger a sharp correction. Investors should remain calm and not give in to euphoria, despite the banks' loud forecasts.