Julian Wiemann: European Stock Market Outlook

For years, European equities were often treated as the less exciting alternative to the US market. Growth appeared slower, political differences were harder to navigate, and Europe had relatively few companies capable of matching the scale and influence of America’s biggest technology firms. That view is becoming harder to defend. European stock markets have entered a different phase. Earnings expectations have improved, valuations remain considerably lower than in the US, and investors are paying closer attention to sectors that had received less attention during the technology-led rally of recent years. For Julian Wiemann, the more interesting question is not whether Europe can simply outperform the US. It is what is changing underneath the surface—and whether those changes can support a longer-lasting revaluation of European equities.

European stocks are entering a new phase

The recent strength of European markets has several explanations.
The STOXX Europe 600 has reached new highs, while analysts have become more constructive on corporate earnings. At the same time, some international investors have started to reconsider the large valuation gap between US and European equities.

US stocks have traded at substantially higher price-to-earnings multiples, while European equities have generally remained cheaper. Depending on the period and index used, the difference has been significant.

The valuation gap exists for a reason. European economies face slower structural growth, political fragmentation and greater exposure to traditional industries. But low valuations can also create room for improvement when corporate earnings begin to recover.

That is where the current European market story becomes more interesting.

Rather than looking at Europe as one single investment theme, Julian Wiemann focuses on the differences between individual sectors and companies. Banks, insurers, industrial manufacturers, healthcare companies, luxury brands and utilities all respond differently to changes in economic conditions.

This sector diversity may prove useful in a market environment where investors are becoming more selective.

Three factors supporting European equities

One of the biggest changes in the European market has been the improvement in earnings expectations.

For much of the past decade, European companies struggled to generate the same level of earnings growth seen in some parts of the US market. More recently, however, a wider group of European companies has delivered results that have exceeded expectations.

Analysts have also become more positive about earnings forecasts for 2026.

The important point is that the improvement is not limited to one industry. Industrial companies, financial institutions, utilities and other sectors are contributing to the broader picture.

If earnings continue to improve, European stocks may have another source of support beyond simply becoming cheaper relative to US equities.

Where the opportunities may be

The opportunity in European equities does not necessarily come from buying the entire market.

A more selective approach may make more sense.

Financial companies could benefit from a relatively stable rate environment and improved economic conditions. Industrial businesses may gain from infrastructure and defense spending. Utilities and grid-related companies could benefit from the investment required to modernize Europe's energy system.

Healthcare and consumer companies offer another dimension, particularly where revenues are diversified across international markets.

Julian Wiemann: What Is Driving European Stock Markets Now?

European stocks are entering a new phase

Three factors supporting European equities

Where the opportunities may be