Major investment banks are presenting varied outlooks for European equities in 2025, with predictions ranging from modest gains to significant upside potential amid concerns about global growth and trade tensions. .STOXX YTD line Goldman Sachs Goldman Sachs lowered its expectations for European stocks, with strategist Sharon Bell forecasting a 12-month price target of 530 for the Stoxx 600 , implying a price return of 3% from current levels. The Wall Street bank’s strategist expects modest earnings growth of 3% and 4% in 2025 and 2026, respectively, citing continued weak economic performance in the region. Bell said that while European stocks have significantly underperformed their U.S. counterparts by more than two standard deviations in the past six months, several catalysts would be needed for this trend to reverse, including a resolution to the Ukraine war, a clear trough in manufacturing or a larger policy response from Europe. “We are doubtful these will provide relief, especially near term. But one area we do see support from is continued dis-inflation in Europe,” Bell said in a note to clients. Barclays Barclays maintains a cautiously optimistic stance, with its European equity strategist Emmanuel Cau setting a year-end 2025 price target of 545 for the Stoxx 600 index, suggesting a 6% potential upside from the current level of 515. The bank expects corporate earnings to grow by 4%, lower than the current market consensus of 8%, citing a continued soft landing scenario as interest rate cuts help maintain global growth close to trend and U.S. trade tariff potential. Cau recommended increasing exposure to luxury goods companies, noting their sharp underperformance year-to-date and strong dollar earnings potential, while also favoring insurance companies over banks due to their relative immunity to trade risks and high capital return potential. Deutsche Bank The German bank’s strategist Maximilian Uleer outlined an optimistic three-act scenario for European markets in 2025. The bank expects about a 6% gain for the Stoxx 600, with the first act involving a recovery in rate-sensitive sectors, followed by improved consumer spending driven by positive real wage growth and better consumer confidence. Deutsche Bank’s third act envisions a manufacturing recovery, though Uleer cautioned this may take longer to materialize. The investment bank maintains a constructive view on rate-sensitive sectors, particularly favoring real estate, construction and consumer staples, while also highlighting retail sectors with strong European exposure as potential outperformers. JPMorgan JPMorgan strategist Mislav Matejka maintained his strong preference for U.S. equities 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 rotation toward European equities might not occur until the second quarter of 2025 after there’s more clarity on trade policies and Federal Reserve interest rate decisions. The strategists also expressed particular concern about European earnings expectations, viewing the consensus forecast of 10% earnings growth for 2025 as overly optimistic and on par with U.S. projections. Matejka noted that China’s stimulus measures have been primarily monetary in nature and may not be sufficient to counter structural growth headwinds, leading to a bearish stance on sectors with significant Chinese exposure such as European automobiles, luxury goods and semiconductors. Bank of America Bank of America’s Sebastian Raedler has laid out a more cautious outlook, predicting the Stoxx 600 will first decline to 470 by mid-2025, representing an 8.7% drop, before recovering to 500 by year-end. The bank points to concerns about slowing global growth and uncertainty surrounding U.S. trade policies as key reasons for their conservative stance. However, Bank of America has turned overweight on European versus global equities, despite their cautious overall outlook. Raedler explained this position by citing improving credit conditions in Europe as the European Central Bank is expected to keep lowering rates, and the potential for higher fiscal spending. The bank also suggests that a possible ceasefire in Ukraine could ease pressure from high energy prices. UBS Wealth manager UBS Investment Bank presented one of the most bullish views among major banks. UBS’ Andrew Garthwaite raised the bank’s end-2025 target for the MSCI All Country World Index to 910 from 900, representing approximately 5% upside, while noting that market conditions could potentially create a financial bubble. The Swiss bank said it had identified six out of seven preconditions for a market bubble, including the end of a structural bull market, pressure on profits, loss of market breadth and increased retail participation. Garthwaite suggests that if such a bubble materializes, certain market segments could see their price-to-earnings ratios expand to between 45 and 72 times earnings, potentially driving the S & P 500 index up by 20%. — CNBC’s Michael Bloom contributed reporting.