Goldman Sachs revised upward its near- and medium-term price objectives for major European equity benchmarks while reiterating a cautious stance on the region compared with global markets.
The bank set new Stoxx Europe 600 targets of 640, 645 and 660 for the three-, six- and 12-month horizons respectively, up from prior targets of 605, 615 and 625. Goldman said the revisions imply roughly a 6% price return and about a 9% total return over the coming 12 months. The firm also raised its targets for the Euro Stoxx 50 and the FTSE 100.
Goldman attributed the higher index targets largely to a mechanical roll-forward and to ongoing resilience in European corporate earnings. The bank highlighted several drivers behind that earnings strength: firmer nominal growth, AI-related capital expenditure supporting earnings in technology, utilities and industrials, and elevated energy prices lifting the energy sector.
Year-to-date performance across European equities, Goldman strategists noted, has been driven more by underlying earnings growth than by an expansion of valuation multiples. The strategists added that consensus earnings revisions have turned more positive in recent weeks, which has helped support the target upgrades.
Despite the target increases, Goldman retains an Underweight recommendation for Europe versus global peers. The bank said similar target upgrades in other regions narrow Europe’s relative upside. It underscored expectations for weaker relative returns due to soft domestic macro dynamics in Europe and a more limited exposure to structural AI tailwinds compared with other markets.
M&A outlook and deal dynamics
Goldman’s team also pointed to robust global mergers and acquisitions activity and flagged M&A as a potential positive catalyst for European equities if momentum broadens. The bank’s financials team projects around 18% growth in global M&A volumes over the next 12 months.
So far, Goldman said, the recovery in M&A has been concentrated in mega-deals: aggregate deal values have rebounded more strongly than transaction counts, indicating that large, high-value transactions have driven much of the pickup.
Looking to the second half of 2026, Goldman identified a pipeline supported by corporate portfolio simplification and by pressures from private equity to return capital through exits. The bank noted that a record share of U.K. chief financial officers have cited asset disposals as a top priority, and that the IPO market outside the U.S. remains subdued, encouraging disposals and exits as alternative routes to capital return.
At the same time, Goldman cautioned that European M&A has lagged the global recovery. The region’s share of global deal activity has fallen to under one-third of total deal volume. Where deals are occurring, foreign buyers have been more active, attracted by valuation discounts and particular factor exposures relative to U.S. assets. Goldman said domestic buyers remain largely sidelined, reflecting weak local risk appetite.
The bank called out small and mid-cap European stocks as especially likely targets for deal activity. STOXX small caps were said to be trading at about 13.5 times forward earnings and close to record discounts to large-cap peers. Goldman argued that a broadening of deal activity beyond the current focus on mega-deals would be an important catalyst for this segment—one that markets have not yet fully priced in.
Bottom line
Goldman’s target increases reflect a mix of methodological updating and an assessment that earnings in Europe have held up better than some expectations. But the bank’s cautious relative stance and its view that European M&A has not yet fully recovered underline the limits to upside absent a wider pick-up in domestic appetite for deals and a broader extension of corporate activity beyond mega-deals.