Market strategists are more bullish on European stocks than they have been in eight years, with a Bloomberg survey showing the most optimistic September forecast since 2018. Strong corporate earnings are cited as the primary driver, outweighing concerns about elevated energy prices and increasing bond yields. The median target from 16 strategists polled by Bloomberg predicts the Stoxx Europe 600 Index will reach 670 points by the end of the year, representing a 5% increase from Wednesday's close.
This positive outlook is supported by robust earnings performance across Europe. MSCI Europe profits have surged by 14%, with more than half of the index's constituents surpassing their Q2 estimates. Both these figures mark the highest levels since early 2023, according to Bloomberg Intelligence. This earnings rebound follows a period of sluggish profit growth, with European companies projected to achieve their strongest profit growth in three years during the second-quarter reporting season, fueled by expected strong results from oil majors, banks, and companies benefiting from artificial intelligence.
HSBC has also revised its year-end target for the STOXX 600 upwards for the first time this year, moving it from 670 to 680 points, which implies a 6.3% upside from current levels. The brokerage anticipates the index will reach 760 by the end of next year. This upgrade is based on expectations of stronger earnings growth, improved business sentiment, and a healthier economic environment. HSBC forecasts European earnings growth of 15.6% in 2026 and 15.4% in 2027, noting that European companies are becoming more domestically focused, with regional revenue exposure at its highest since 2017. A weaker euro could further boost corporate profits.
J.P. Morgan Asset Management highlights that European equities are increasingly attractive, not just due to low valuations but also improving earnings momentum, rising corporate margins, and expanding Purchasing Managers' Index (PMI) readings. Key growth drivers include infrastructure development, fiscal spending on defense and energy security, and accelerating bank lending. European earnings estimates project nearly 20% growth for 2026 and over 10% for 2027, with these forecasts appearing more credible due to positive revisions, better PMIs, and broader sector participation. Banks, industrials, capital goods, defense, renewables, and energy infrastructure are identified as strong sectors.
