Leading global banks, including UBS and Deutsche Bank, have significantly raised their target levels for the European stock index Stoxx Europe 600. Analysts expect the index to rise by approximately 8% by the end of this year, confirming confidence in the continued strengthening of corporate profits despite ongoing geopolitical instability.
After a volatile first half of the year, the European stock market has fully compensated for previous losses and reached new historical highs. In early July, the index set 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 following a ceasefire agreement has allowed the upward trend to resume.
Banks Bet on a Bullish Scenario
UBS strategists have raised their target from 630 to 690 points. The bank expects the rally to continue until 2027, with a forecast for the index at that time of 760 points — a 19% increase over the next year and a half. UBS's forecast for 2026 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' Opinions Diverge
In a July survey, 18 strategists on average expect the index to 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. Just two predict a drop of more than 5%.
The most cautious estimate comes from TFS, expecting a 9% decline to 585 points. Next is Societe Generale: strategist Roland Kaloyan forecasts a correction of about 6% to 600 points. "The main risk, in our view, is not the lack 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: The raising of forecasts by giants like UBS and Deutsche Bank is undoubtedly a bullish signal for the market. However, it is worth remembering that current high expectations are already priced in. Any disappointment in corporate reports could trigger a correction. Investors should closely monitor profit data in the second half of the year — it will be the key driver or trigger for a reversal.