(Bloomberg) -- European equities face a much brighter outlook in 2025 amid improving economic prospects and a low bar for corporate earnings after badly lagging US stocks last year, according to strategists at Deutsche Bank AG.
The team led by Maximilian Uleer turned overweight on regional equities in a note published Tuesday. They expect the benchmark Stoxx 600 Index to end the year around 590 points — implying gains of about 15% from current levels, and the highest target among strategists tracked by Bloomberg.
“Economic surprises continue to improve, political uncertainty is fading, a new German government likely offers more opportunities than risks and potential Chinese stimulus announcements add upside risk,” Uleer wrote, adding that expectations for fourth-quarter earnings “look easy to beat.”
European stocks have struggled to sustain a rally since a record high in September on worries about political risk at home and underwhelming economic expansion in China, one of its biggest trading partners. Concerns about potential US tariffs following Donald Trump’s return to the White House have also kept investors away from regional stocks.
The Stoxx 600 trailed the S&P 500 by 17 percentage points last year in local currency terms — the second-biggest underperformance since the European gauge was created in 2008, data compiled by Bloomberg show.
Forecasters remain more optimistic about US stocks, with the S&P 500 expected to rally another 11% this year, while the Stoxx 600 is seen advancing 4%, according to an average forecast from strategists tracked by Bloomberg.
Uleer also expects US stocks “do well this year,” but added there were “various triggers for a tactical outperformance of European equities.” The strategist was among Europe’s biggest equity bulls in 2024, too. The Stoxx 600 ended the year within striking distance of his initial target of 510 points, although he had later updated that to 540.
His counterpart at Citigroup Inc., Beata Manthey, also recommended that investors “re-engage” with European equities, partly after bearish positioning reached extreme levels.
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