Europe's largest financial institutions are showing confident optimism regarding the region's stock market. UBS analysts have revised their target for the Stoxx Europe 600 index, raising it from 630 to 690 points. This implies growth of approximately 8% from current levels by the end of this year. This decision is not just a targeted adjustment but a reflection of fundamental confidence in the sustained recovery of corporate profits, which continues despite ongoing geopolitical tensions.
After a volatile first half of the year, the European stock market has not only fully compensated for previous losses but has also reached new all-time highs. On July 3, the index recorded a record at around 652 points. Currently, the indicator has corrected to 639 points, yet 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.
Banks are raising the stakes: who is setting the pace?
UBS's forecast for 2026 is higher than that of JPMorgan (680 points), which previously offered the highest estimate. Bank of America, Deutsche Bank, and Kepler Cheuvreux have also raised their forecasts. UBS strategists expect the rally to continue into 2027, with a target for the index at 760 points — representing growth of 19% over the next year and a half.
Analysts highlight stronger dynamics in the segment related to artificial intelligence, stable revisions of bank indicators, and reduced pressure from defensive sectors. However, strategists' opinions 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 — 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. Just two forecast a drop of more than 5%. The most cautious estimate comes from TFS, expecting a decline of 9% to 585 points. Next is Societe Generale: strategist Roland Kaloyan predicts 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.
My analysis: The market is in a classic "buy the rumor, sell the news" phase. The consensus forecast of 647 points leaves virtually no margin for error. If second-quarter earnings, which have already exceeded expectations for more than 45% of companies, begin to show a slowdown, the correction could be deeper than the bulls anticipate. Investors should closely monitor profit growth rates rather than short-term price targets.