Strategists Most Bullish on European Stocks in Eight Years

Market strategists have issued their most bullish September forecast for European stocks in eight years, with sentiment reaching levels not seen since 2018. This optimistic outlook is underpinned by a survey conducted by Bloomberg, which indicates that strong corporate earnings are effectively counterbalancing the negative effects of elevated energy prices and increasing bond yields. The survey aggregates the views of numerous market strategists, providing a consensus view on the expected performance of European equities.

The positive sentiment surrounding European stocks is a notable shift, considering the persistent challenges posed by high energy costs, a direct consequence of geopolitical instability and supply chain disruptions. Furthermore, central banks globally, including those in Europe, have been raising interest rates to combat inflation, leading to higher bond yields. These higher yields typically make fixed-income investments more attractive relative to equities, potentially drawing capital away from the stock market. However, the resilience of corporate profits in Europe suggests that companies are either absorbing these increased costs or passing them on to consumers, maintaining their profitability.

This heightened bullishness implies that strategists anticipate that the earnings growth reported by European companies will be substantial enough to overcome the headwinds from energy prices and interest rates. Strong earnings are a fundamental driver of stock market performance, as they reflect a company's ability to generate profits and provide value to shareholders. The Bloomberg survey's findings suggest a belief that the underlying economic strength and corporate efficiency within Europe are robust. The specific period of focus for this bullish sentiment is September, indicating a short-to-medium term positive outlook.

The historical context of this sentiment is significant; the last time strategists were this optimistic about European stocks in September was in 2018. This comparison highlights the current strength of the bullish conviction, suggesting a potential turning point or a period of sustained outperformance for the European market. The survey's methodology, aggregating views from a diverse group of strategists, lends credibility to the findings. The collective assessment points towards a favorable environment for European equities, despite broader macroeconomic concerns. The ability of European corporations to deliver strong earnings in the face of significant economic pressures is a key factor contributing to this optimistic forecast.