Major investment banks are offering diverse forecasts for European stocks in 2025, with forecasts ranging from modest gains to significant upside potential amid concerns about global growth and trade tensions. STOXX LINE Since the start of the year, Goldman Sachs has lowered its forecasts for European stocks, with strategist Sharon Bell predicting a 12-month price target of 530 for the Stoxx 600 index, implying a price return of 3% from current levels. The Wall Street Bank strategist expects modest profit growth of 3% and 4% in 2025 and 2026, respectively, pointing to continued weak economic performance in the region. Bell said that although European stocks have underperformed their US counterparts by more than two standard deviations in the past six months, several catalysts are needed to reverse the trend, including a resolution to the war in Ukraine, or a clear decline. In industrialization or a greater political response from Europe. “We are skeptical that this will provide relief, especially in the near term. But one area where we see support is continued low inflation in Europe,” Bell said in a note to clients. Barclays maintains a cautiously optimistic stance, with European equity strategist Emanuel Cow setting a year-end 2025 target price of 545 for the STOXX 600, suggesting a potential upside of 6% from the current level of 515. The bank expects corporate profits to rise. Growth of 4%, below current market expectations of 8%, pointing to a continued soft landing scenario as interest rate cuts help keep global growth close to trend and possible US trade tariffs. Cao recommended increasing exposure to luxury goods companies, noting their sharp year-to-date underperformance and strong dollar earnings potential, while also favoring bank insurers due to their relative immunity to commercial risks and high capital return potential. Deutsche Bank German bank strategist Maximilian Ohler has set an optimistic three-quarter scenario for European markets in 2025. The bank expects gains of approximately 16.5% for the Stoxx 600 to 590 index by the end of the year, with the first quarter including a recovery in interest rate-sensitive sectors, followed by improved spending. Consumer growth is driven by positive growth in real wages and improved consumer confidence. Deutsche Bank's third law envisions a recovery in the manufacturing sector, although Oller warned that this may take longer to materialize. The investment bank maintains a constructive view on interest rate sensitive sectors, particularly favoring real estate, construction and consumer goods, while also highlighting retail sectors with strong European exposure as potential outperformers. Mislav Matejka, a strategist at JPMorgan, maintained a strong preference for US stocks over European stocks, despite their already exceptional relative performance. 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 suggested that any significant shift towards European stocks may not happen until the second quarter of 2025 after there is more clarity on trade policies and the Fed's interest rate decisions. The strategist also expressed particular concern about the European earnings outlook, considering the consensus forecast for 10% earnings growth for 2025 to be overly optimistic and on par with US expectations. Matejka noted that China's stimulus measures were primarily monetary in nature and may not be sufficient to counter structural growth headwinds, leading to a bearish stance in sectors with significant Chinese exposure such as European autos, luxury goods and semiconductors. Bank of America's Sebastian Riedler made a more cautious forecast, predicting that the Stoxx 600 would first fall to 470 by mid-2025, representing an 8.7% decline, before recovering to 500 by the end of the year. The bank cites concerns about slowing global growth and uncertainty surrounding US trade policies as the main reasons for its conservative stance. However, Bank of America has shifted to an overweight in European stocks versus global stocks, despite their cautious overall outlook. Riedler explained this position by pointing to improving credit conditions in Europe as the European Central Bank is expected to continue cutting interest rates, and the potential for increased fiscal spending. The bank also notes that a potential ceasefire in Ukraine could ease pressure from rising energy prices. UBS Investment Bank, the wealth manager at UBS, offered one of the most optimistic views among the major banks. UBS's Andrew Garthwaite raised the bank's end-2025 target for the MSCI All Country World Index to 910 from 900, representing a rise of about 5%, while noting that market conditions could create a financial bubble. The Swiss bank said it has identified six out of seven preconditions for a market bubble, including the end of a structural bull market, pressure on earnings, loss of market breadth and increased retail participation. Garthwaite notes that if such a bubble materializes, some market sectors could see price-earnings ratios expand to between 45 and 72 times earnings, which could cause the S&P 500 to rise by 20%. — CNBC's Michael Bloom contributed reporting. Correction: This article has been modified to accurately reflect Deutsche Bank's current target price.
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Wall Street is mixed on European stocks for 2025. Here are their big predictions
