Key Points
- The STOXX 600 is expected to rise 0.9% by the end of 2025 and reach 570 by mid-2026.
- The Euro STOXX 50 is projected to close 2026 at 5,700, representing a 5.3% increase from current levels.
- Trade tensions, especially involving U.S. tariffs, pose risks to further gains. ECB rate cuts are expected to continue.
- Despite strong YTD performance, Germany’s DAX is forecast to decline 5.1% by year-end.
European shares are projected to rise modestly by the end of 2025 and reach new highs in 2026, according to a Reuters poll of equity analysts and portfolio managers, driven by monetary easing and increased fiscal spending. However, uncertainties surrounding global trade and potential tariffs are keeping investor optimism in check.
The poll forecasts that the pan-European STOXX 600 index will rise to 557 points by the end of 2025, a modest 0.9% gain from current levels and still below its record high of 565.18, reached in March. By mid-2026, it is expected to rise to 570 points and remain at that level through year-end, although this is down from earlier estimates of 610. Similarly, the Euro STOXX 50 index is expected to gain 0.6% in 2025 and close 2026 at 5,700, a 5.3% rise from its recent close of 5,415.45.
While European equities have outperformed U.S. markets so far this year, rising nearly 9% compared to a 0.7% increase in the S&P 500, investors remain cautious due to volatile trade policies. Markets were shaken recently after former President Donald Trump announced plans for broad 50% tariffs on EU imports, although their implementation was delayed.
Analysts warn that unresolved trade disputes between the U.S. and EU could trigger sudden market shocks. “We are still waiting for resolutions… this could most certainly be a catalyst for a market shock,” said Michael Field of Morningstar.
On the positive side, Germany’s expanded spending on defense and infrastructure is expected to benefit the broader eurozone economy and boost corporate earnings, especially in industrial sectors. According to Carmignac’s Kevin Thozet, this fiscal momentum will support growth for years to come.
However, not all is bullish. With much of the good news already factored in, analysts expect Germany’s DAX index to fall 5.1% by year-end despite having risen over 20% in 2025 and touching record highs above 24,300.
Additionally, expectations of further European Central Bank rate cuts—with another cut anticipated next week—are expected to enhance credit demand and reduce savings rates, providing more support for equities.
