UBS analysts raised their target for the Stoxx Europe 600 index from 630 to 690 points, forecasting an 8% increase by the end of this year. This decision is backed by confidence in strengthening corporate profits, despite ongoing geopolitical tensions.
After a volatile first half of the year, the European stock market has fully compensated for previous losses and reached new all-time highs. On July 3, the index recorded a record at around 652 points, before correcting to 639 points. Nevertheless, total year-to-date returns exceed 7%. The easing of tensions around Iran, thanks to a ceasefire agreement, has revived the upward trend.
UBS strategists Gerry Fowler and Suthanya Chadda raised the target to 690 points from the previous 630. The bank expects the rally to continue into 2027: the index forecast for that period is 760 points — a 19% increase over the next year and a half. This 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, 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, and only two forecast a drop of more than 5%.
The most cautious assessment comes from TFS, which expects a 9% decline to 585 points. Next is Societe Generale: 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.
My analysis: The market is clearly in a phase of optimism, but the divergence in forecasts indicates the fragility of the current rally. Investors should closely monitor second-quarter reports — already, more than 45% of companies have exceeded expectations, but 27% have reported worse-than-forecast results. This signals uneven recovery, and any setback could trigger a correction.