Goldman Sachs strategists warn that investors remain skeptical about European equities, largely waiting to see whether Germany follows through on promised fiscal reforms and concerned that Europe is lagging as AI boosts U.S. stocks and China outperforms other emerging markets. Analysts Sharon Bell and Christian Mueller-Glissmann say this caution has pushed Europe down many investors’ priority lists. "Europe has moved to the bottom of the shopping list," Mueller-Glissmann said, while Bell added: "I want to see it rather than be told it will happen."

Earlier this year the Stoxx 600 outperformed U.S. peers in dollar terms after Germany pledged hundreds of billions of euros for defence and infrastructure, a notable policy shift for the country. In recent weeks the Stoxx 600 has lost ground: the S&P 500 is up about 12% year-to-date at record highs, while the Stoxx 600 is up roughly 8.6% and sits below its March peak. Investors have rotated back into U.S. assets amid signs of resilient growth, expectations of Fed rate cuts and renewed enthusiasm for AI-driven tech stocks.

Goldman strategists say Germany’s spending plans have nevertheless provided a fiscal anchor that reduces fears of extreme downturns. They note questions remain on when stimulus will translate into corporate profits and whether some funds might be absorbed by public budgets. Mueller-Glissmann also reports clients see a very low probability of negative rates in Europe over the next decade, a positive for banks. Bell forecasts corporate earnings growth of about 4% and 6% over the next two years and expects the Stoxx 600 to rise roughly 5% over the next 12 months, noting: "If Europe delivers three quarters of its promises, I would say the market will do very well." #Stoxx600 #SP500 #Germany #FiatNews