Wall Street’s views on European stocks in 2025 are mixed. | Wilnesh News
Major investment banks have offered varying outlooks for European stocks in 2025, with forecasts ranging from modest gains to huge upside potential amid concerns about global growth and trade tensions. .STOXX YTD line Goldman Sachs has lowered its forecast for European stocks, with strategist Sharon Bell forecasting a 12-month price target for the Stoxx 600 of 530, implying a 3% recovery from current levels. . The Wall Street bank strategist expects modest earnings growth of 3% and 4% in 2025 and 2026, respectively, as the region’s economic performance continues to weaken. Bell said that while European stocks have significantly underperformed U.S. stocks by more than two standard deviations over the past six months, reversing that trend would require several catalysts, including a resolution of the war in Ukraine, a clear trough in manufacturing or a recession. and a greater policy response. Bell said in a note to clients: “We doubt these measures will bring relief, especially in the short term. But we do see support from continued deflation in Europe.” Barclays maintained a cautiously optimistic stance, with its European equity strategist Emmanuel Cau has set a price target for the Stoxx 600 Index at the end of 2025 of 545 points, implying a potential upside of 6% from the current level of 515 points. It will grow by 4%, below the current market consensus of 8%, on the grounds that interest rate cuts will help keep global growth close to trend and the potential for U.S. trade tariffs to continue a soft landing. Kao recommended increasing investment in luxury goods companies, noting their severe year-to-date underperformance and strong dollar earnings potential, while also favoring insurance companies over banks because of their relative immunity to trade risks and higher capital return potential. Maximilian Uleer, strategist at Deutsche Bank AG, outlined an optimistic three-act scenario for European markets in 2025. Positive growth in real wages and improving consumer confidence boosted consumer spending. Deutsche Bank’s third bill envisions a manufacturing recovery, but Uhler warned that may take longer to materialize. The investment bank maintains a constructive view on rate-sensitive sectors, with particular bullishness on real estate, construction and consumer staples, while also highlighting Europe’s more exposed retail sector as a potential outperform. JPMorgan strategist Mislav Matejka still expresses a strong preference for U.S. stocks over European stocks, even though their relative performance has been outstanding. The S&P 500 is up more than 25% this year, while the Stoxx 600 is up just 7.4% over the same period. The Wall Street bank said any major turnaround in European stocks may not occur until the second quarter of 2025, after more clarity on trade policy and Federal Reserve interest rate decisions. The strategist also expressed particular concern about European profit expectations, arguing that the consensus forecast of 10% profit growth in 2025 is too optimistic and is on par with U.S. forecasts. Matka pointed out that China’s stimulus measures are mainly monetary in nature and may not be enough to deal with structural growth headwinds, leading to a bearish stance on industries with greater exposure to China, such as European automobiles, luxury goods and semiconductors. Bank of America’s Sebastian Raedler offered a more cautious outlook, expecting the Stoxx 600 to first fall to 470 points in mid-2025, a drop of 8.7%, before recovering to 500 points by the end of the year. The bank cited concerns about slowing global economic growth and uncertainty about U.S. trade policy as the main reasons for its conservative stance. However, despite a cautious overall outlook, Bank of America remains overweight European equities relative to global equities. Redler explained the stance by citing improving credit conditions in Europe, where the ECB is expected to continue lowering interest rates, and the potential for increased fiscal spending. The bank also said a possible ceasefire in Ukraine could ease pressure from high energy prices. UBS Wealth Management UBS Investment Bank offered one of the most optimistic views among the major banks. UBS’s Andrew Garthwaite raised his end-2025 target for the bank’s MSCI All Country World Index to 910 from 900, a gain of about 5%, while noting that market conditions could produce financial bubble. The Swiss bank said it had identified six of the seven prerequisites for a market bubble, including the end of a structural bull market, profit pressures, losses in market breadth and increased retail participation. If such a bubble materializes, Garthwaite said price-to-earnings ratios in some segments could expand to 45 to 72 times, potentially pushing the S&P 500 up 20%. —CNBC’s Michael Bloom contributed reporting.
