Goldman Sachs says European stocks can rise without beating the US

Goldman's message on European stocks is not that Europe is about to win. It is that Europe can still pay off without taking the crown from the United States. That distinction matters inside Goldman because it changes the way you frame the trade for clients: less “Europe versus America,” more “where can European earnings, rates, and valuations still support returns?”

Why this call matters

Sharon Bell, Goldman's European portfolio strategist, has raised target prices for European indices, but she still does not think they will outperform US equities. That is the real story here. A lot of client conversations get stuck in a false binary, as if Europe must either catch up sharply or be dismissed entirely. Goldman's view pushes back on both extremes and points to a more selective market where European stocks can contribute positive returns even if they do not overtake US benchmarks.

For people on the coverage side, that is a useful reminder that the pitch is not a blunt regional bet. It is a relative-value conversation built around sectors, earnings streams, balance-sheet strength, and currency sensitivity. If you are in research, sales, trading, or a client-facing coverage role, this is the kind of call that changes how you build the next slide deck and what you say when a client asks whether Europe is finally “the trade.”

Goldman's broader 2026 outlook is constructive but measured. The firm expects the STOXX 600 to deliver an 8% total return in 2026, helped by global growth, falling interest rates, and rising corporate earnings. At the same time, Goldman says European stocks are not cheap in historical terms, sitting in the 71st percentile of P/E over the past 25 years. That mix is important: the market has room to move, but the easy valuation argument is gone.

What Goldman thinks has to go right

The case rests on several conditions holding together at once. Goldman’s economists forecast global real GDP growth of 2.8% in 2026 and euro area growth of 1.3%, while the European equity strategy team projects STOXX 600 EPS growth of 5% in 2026 and 7% in 2027. Those numbers do not describe a boom. They describe enough improvement in the macro backdrop and earnings base to justify gains, but not enough to promise a dramatic rerating.

That is why Goldman’s January research note said 2026 should be a better year for the euro area economy than 2025, but only by a small margin because of structural headwinds at home and abroad. Bell has also warned that a stronger euro could weigh on corporate earnings by hurting exporters. In other words, the bull case is real, but it is conditional. If the currency moves the wrong way, if earnings revisions stall, or if global growth softens, the thesis gets thinner fast.

Goldman has also leaned on a separate but related argument: Europe looks more appealing to investors worried about the concentration of US equity exposure in a handful of technology names. Bell has said US investors in the US market are effectively buying exposure to “five or six companies,” while Europe offers broader breadth. That is not a promise of outperformance. It is a diversification argument, and it is one that resonates when US market leadership is narrow.

The June 1 move, reported by Reuters, helps show how Goldman is calibrating the call. The firm raised its 12-month STOXX 600 target again, to 660, after previously lifting it to 625 from 615 on January 6. That January target implied roughly 4% upside from a record close near 601.76. Reuters said the later increase followed a 2.5% gain in May for the pan-European benchmark and came amid resilient corporate earnings growth despite conflict in the Middle East. The message is not that Goldman is chasing the tape. It is that the firm sees room for the rally to continue if earnings hold up.

Who inside Goldman should care

This matters most for the desks and teams that have to turn macro views into client language. Equities research needs to translate the thesis into sector calls, factor exposure, and earnings revisions. Sales needs to know which clients are likely to want a Europe-over-US story and which ones need a reminder that this is not an all-or-nothing call. Traders and portfolio strategists need to think about how to express the view through relative value, because a Europe long can still work even without a full US short attached to it.

For bankers, the takeaway is more practical than ideological. If clients are asking where to allocate incremental capital, Europe becomes a more credible conversation when it is framed around earnings resilience, better breadth, and selective opportunities rather than a blanket catch-up trade. That is especially relevant for analysts, associates, and VPs who live in the weeds of pitch books and internal talking points. The question is not whether Europe beats the S&P on a headline basis. It is which industries can still justify capital, hiring, and coverage time when the US remains the global benchmark.

London also matters here. Goldman’s discussion came off the trading floor in London, which is a reminder that some of the firm’s most important cross-border market judgments are made in real time where Europe meets the US and the client base is inherently global. For EMEA staff, that means local expertise still counts, but only if it can be linked to a global frame that clients can use.

Signals to watch before repeating the thesis internally

Before echoing the Europe-over-US view in a client meeting or team discussion, watch for these signals to line up:

• European earnings revisions stay positive, especially the expected 5% EPS growth for 2026 and 7% for 2027.
• The euro does not strengthen enough to squeeze exporters and drag on corporate profits.
• Global growth remains close to Goldman’s 2.8% forecast, while euro area growth tracks toward 1.3% without slipping.
• The STOXX 600 keeps advancing on earnings strength, not just a valuation bounce.
• US equity leadership stays concentrated, reinforcing the diversification case Bell has described.
• Structural headwinds in Europe do not worsen faster than expected, even as German fiscal spending and solid global growth help the backdrop.
• Goldman and other large banks keep nudging targets higher for European indices without suddenly claiming Europe will beat the US.

The practical conclusion for Goldman teams is simple: Europe does not need to outperform the US to be worth owning, pitching, or trading. If the macro, earnings, and currency pieces hold together, the region can still deliver a respectable return. That is a more useful call for clients, and a more honest one for the people inside Goldman who have to live with the consequences.