European stock market outlook: Will the Stoxx 600 continue its upward trend?
All eyes in global financial circles are on European stocks , which are showing remarkable resilience and a willingness to overcome the obstacles posed by escalating trade and geopolitical tensions. According to a recent Bloomberg survey, investors are betting on continued optimism regarding the economic outlook for the continent as a key condition for sustaining this momentum.
Optimistic outlook for the Stoxx 600 index
The average forecast from financial strategists indicates that the European Stoxx 600 index is poised to rise by approximately 4% by the end of this year compared to last Wednesday's closing levels, targeting a level of 626 points . This optimism is supported by the index's strong performance, which has seen it rise by about 3% since the beginning of the year, following an exceptional year in 2025 in which it achieved gains of nearly 17%, thus reinforcing the "optimistic beginnings" trend that has characterized the European market over the past three years.
Confidence of major financial institutions
In a move reflecting growing confidence, both Goldman Sachs and HSBC raised their target levels for the index compared to their December survey. This positive adjustment indicates that these major institutions are unconcerned by current high valuations or the intensity of surrounding geopolitical tensions, basing their decision on several key factors:
- Economic growth and expected corporate profits.
- Central banks adopt accommodative monetary policies that support liquidity.
- Accelerating the pace of financial and governmental spending in vital sectors.
HSBC emerged as the most optimistic institution, raising its target level for the index from 640 points to 670 points , representing a potential increase of up to 11% from current levels.
Profitable sectors and investment opportunities
Jerry Fuller, head of European equity strategy at UBS, believes the timing for entering the market remains opportune, predicting the index will reach 650 points. Fuller noted that signs of fiscal stimulus reaching the infrastructure sector are already emerging, suggesting an imminent acceleration in the pace of European growth.
Analysts currently favor focusing on cyclical and value stocks , as faster growth and rising bond yields are expected to widen profit margins. Preferred sectors include:
- The financial and banking sector.
- Public utilities and transportation.
- Retail trade.
- Healthcare equipment and technical devices.
Challenges and potential risks
On the other hand, analysts are adopting a more conservative approach toward specific sectors that may be vulnerable to external fluctuations, such as automobiles, chemicals, food and beverages, and tobacco. This caution stems from the challenges posed by currency volatility and concerns about the imposition of new tariffs that could disrupt supply and export chains.
The economic context and the impact of geopolitical tensions
Historically, European markets have proven resilient to geopolitical crises, from energy challenges to trade disputes. The current bet on European equities comes at a time when capital is seeking to diversify portfolios away from overvalued markets, taking advantage of European valuations that remain attractive compared to their US counterparts.
The continued flow of positive economic data, coupled with pro-growth government policies, could form a strong buffer against any potential geopolitical turmoil, making the European market a preferred destination for investors seeking stable returns and long-term growth.
