The Wall Street investment firm has increased its yearly forecast for the STOXX 600 European stock index to 660, according to an announcement made on June 1st. The firm pointed to strong corporate profit performance as the primary reason for the optimistic outlook, even as conflicts in the Middle East continue.
The European stock benchmark has been trading near all-time highs and posted a 2.5% increase during May, though Middle Eastern conflicts have created some investor uncertainty and prevented even stronger gains.
The updated forecast suggests potential growth of approximately 5.4% compared to the index’s most recent closing price of 626.
The investment firm also increased its shorter-term projections, setting three-month and six-month targets at 640 and 645 respectively, based on a Friday report. The company’s previous target figures were not immediately available.
“Solid nominal growth, positive revisions in energy, and resilient margins across the rest of the market have underpinned the move (rally),” the firm stated, noting that artificial intelligence enthusiasm has also contributed to the market’s strength.
However, the brokerage warned that inflation concerns and expectations of prolonged higher interest rates are preventing stock valuations from reaching even higher levels.
Unlike the U.S. market, Europe’s rally hasn’t been dominated by just a few large companies, though AI-related stocks and energy companies have led the gains while consumer-focused sectors have fallen behind.
The STOXX 600’s forward price-to-earnings ratio for the next 12 months currently sits at 17.55, making it significantly less expensive than the S&P 500’s ratio of 27.94.
The firm projects earnings-per-share increases of 10% in 2026 and 5% in 2027 for the index, with growth expected to moderate as rising energy costs pressure profit margins.
Regarding investor behavior, the brokerage noted that international investors are continuing to put money into European markets seeking value and portfolio diversification, while European investors remain hesitant due to sluggish economic growth and market uncertainty.
“At the same time, concerns around equity supply look overdone, with appetite for the market to absorb more,” the firm added.
