By Ozan Ergenay
LONDON (Reuters) – European shares will repeat this year’s strong gains in 2026, a Reuters poll indicated, with investors hopeful that an improving economic environment combined with still low valuations relative to the U.S. will send indexes up 11% from current levels.
European stocks are also well placed to fall less than other indexes, such as those in the U.S., should the much-discussed bubble in artificial intelligence stocks burst, investors said.
The pan-European STOXX 600 index is expected to rise to 623 points by the end of 2026, according to the median forecast in the poll of equity analysts and portfolio managers.
That would imply a gain of around 11% from current levels and push the index well above a record high of 586.33 touched earlier this month.
The STOXX 600 has rallied 11.9% this year. It initially benefited as Germany’s decision to scrap its constitutional debt brake drove optimism about the European economy, and as investors shifted assets out of tariff-roiled U.S. markets.
While U.S. stocks bounced back later in 2025, European indexes continued to gain in the second half of the year, rising alongside a rally in world stocks.
And investors see scope for further gains next year, particularly as European indexes remain cheap in comparison with those elsewhere.
“The discount in prices for similar businesses between the U.S. and Europe is at new records and the coming quarters are expected to see a convergence in economic trajectory between European economic growth and that of the U.S.,” said Kevin Thozet, a member of the investment committee at Carmignac.
He said this should be reflected in the earnings of European companies.
The blue-chip Euro STOXX 50 benchmark index is also expected to post a 6.7% gain to 5,900 in the next year before reaching new heights in mid-2027 at 5,955, the poll showed.
AI DILEMMA
There was much excitement in Europe at the start of 2025 when the STOXX 600 dramatically outperformed the S&P 500.
That outperformance fizzled out in the second half of the year, with the two indexes up roughly the same amount in local currency terms. Which will outperform next year will depend on what happens with high-flying technology stocks, respondents to the poll said.
A year-long rally in tech stocks has lost some steam in recent weeks, with investors concerned about whether long-promised returns will materialise, circular spending within the sector, and debt issuance.
“AI may hold the fate of equities in 2026 but is no longer a one-way trade, nor the only show in town,” said Magesh Kumar Chandrasekaran, European equity strategist at Barclays.
