For the first time in nearly a decade, not a single major strategist expects European equities to fall in 2026 — a rare consensus that recalls the overly optimistic forecasts made ahead of the 2018 downturn. According to a Bloomberg survey of 17 strategists, the Stoxx Europe 600 is expected to rise about 7% to 620 points next year, with bullish calls driven by improving economic data, attractive valuations, and expectations of fiscal support.

The last time strategists were this unanimously positive was in 2018 — the same year European markets suffered a steep 13% decline. This historical parallel is raising eyebrows, even as optimism builds.

Broad Optimism, Few Risks Priced In

Forecasters at UBS, Deutsche Bank, and JPMorgan are among the most bullish, seeing gains of nearly 13% from current levels. JPMorgan’s Mislav Matejka argues that Europe is entering a favorable setup with earnings poised for a significant rebound and potential stimulus spillover if China’s economy strengthens.

European equities have already posted a strong 2025, with the Stoxx 600 up 15% and on track for a third year of gains. Local markets have seen standout performances: Spain’s Ibex 35 surged 47%, Germany’s DAX rose 23%, and the UK’s FTSE 100 climbed 19%. France’s CAC 40 lagged with a 9.8% gain.

Citi strategist Beata Manthey sees the momentum continuing, citing stronger economic indicators, positive earnings revisions and supportive fiscal and monetary policy conditions. Her target of 640 points reflects confidence in cyclicals, domestically oriented sectors, and banks.

But Market Signals Echo 2018 Risks

Analysts warn that several conditions resemble the pre-2018 environment: strong forecasts, low rates, upbeat earnings estimates and a prior-year equity rally. That setup led to an unexpectedly volatile 2018 marked by a sharp economic slowdown.

Bank of America strategists remain cautious, arguing the market is underpricing risks, including fragility in the U.S. labor market and softening global growth. They forecast a drop to 530 points by mid-2026 before a year-end rebound to 565.

Another concern: the rally in 2025 was heavily concentrated, with banks contributing 45% of gains and defense stocks 13%. Sustaining momentum will require broader sector participation — something far from guaranteed.

Long-Term Supportive Forces

Even skeptics acknowledge that Europe has powerful structural tailwinds. More than €2 trillion in regional grid and clean-power investment, alongside Germany’s planned €500 billion infrastructure fund and rising defense budgets, could provide multi-year support. The Stoxx 600 also trades at a steep 35% discount to the S&P 500 on a forward P/E basis, underlining its relative value appeal.

Bloomberg Intelligence expects only modest upside from here, with future gains relying more on earnings delivery than multiple expansion. Easing wage and energy pressures may help margins recover, particularly for lagging sectors such as autos, energy, and basic resources.