Goldman and Citi Say Europe’s Economy Could Drive Stocks Even Higher

​Wall Street heavyweights Goldman Sachs and Citigroup are turning bullish on European equities, citing stronger-than-expected economic momentum that could help the region’s stocks weather geopolitical tensions and trade uncertainties.

According to strategists, risks from the U.S. tariff agenda, Middle East instability, and slowing global growth may slow—but not derail—Europe’s stock rally. The region’s fiscal support, looser monetary policy, and improving macro data are helping build investor confidence.

Key Forecasts and Indicators
-The Stoxx Europe 600 Index is expected to finish the year around 557 points, implying roughly 3% upside from current levels and total returns near 10%.
-Economic surprises are tilting in Europe’s favor over the U.S., as shown by divergence in macro indicators.
-Sectors like energy and utilities have outperformed, though the index is down slightly for the month.

Strategists at Citi point to “structural tailwinds” including improved corporate earnings prospects and a reversal of U.S. equity overexposure. Goldman Sachs adds that Europe offers a compelling diversification story, particularly for investors heavily concentrated in U.S. tech.

Investor Sentiment Turning Up
According to a recent Bank of America fund manager survey:
-34% of respondents said they were overweight European equities—near a four-year high.
-75% expect gains in European stocks over the next 12 months.
-A growing number are underweight U.S. equities, showing rising skepticism about continued American outperformance.

What's Next?
Analysts say a few developments could boost confidence further:
-Clarity on the July 9 U.S. tariff deadline
-Resolution of the German fiscal package
-Progress on NATO spending and Ukraine ceasefire negotiations

Deutsche Bank strategists argue that U.S. companies may be hit harder by tariffs than their European peers and that Europe still has the edge on valuations, earnings momentum, and policy clarity.

​Bottom line: Europe may no longer be the laggard. With a stronger economy, easing central bank policies, and waning U.S. dominance in portfolios, European equities could be primed for a leadership role in global markets—especially if trade tensions cool and investors seek balance beyond tech-heavy U.S. assets.