Goldman Warns Investors Are Cooling on European Stocks

​Europe Slips Down the List
Global investors are getting skeptical about Europe’s stock rally. Goldman Sachs strategists say money managers are waiting for Germany to finally deliver on its big-spending promises before piling back in. Until then, Europe’s falling behind the U.S. and China.

“Show Me the Money”
“Europe has moved to the bottom of the shopping list,” said Goldman’s Christian Mueller-Glissmann. Fellow strategist Sharon Bell added that investors want to see real action, not just pledges. The frustration: billions have been promised, but little has hit the ground.

From Outperformance to Catch-Up
Earlier this year, Europe’s Stoxx 600 Index beat U.S. peers by a record margin, thanks to Germany’s vow to pour hundreds of billions into defense and infrastructure. But the glow has faded, with U.S. stocks surging on AI momentum and China powering ahead in emerging markets.

Allocation Slips
A Bank of America survey in September found fund managers trimmed European equity allocations. They’re not predicting a crash, but they’re cautious — no one expects declines worse than 5%. Investors see fiscal plans as a buffer, but not enough to spark runaway gains.

Fiscal Promise, Profit Questions
Germany is planning massive spending on roads, bridges, and its military. Still, some investors fear the money could just replace existing budgets rather than fuel new growth. That uncertainty is capping optimism.

Banks Like the Odds
One bright spot: Goldman says the risk of Europe going back to negative rates is “very, very low,” which is good news for banks. Meanwhile, Bell sees corporate earnings climbing 4–6% over the next two years, with the Stoxx 600 potentially gaining 5% in the next 12 months — if Europe follows through on most of its promises.

The Bottom Line
​Europe isn’t out of the game, but it’s lost its shine. Without visible progress on Germany’s spending plans, investors are parking more cash in the U.S. and China, where momentum feels stronger.