European Equities May Outperform US Stocks Through 2026

European equities may outperform U.S. equities in the coming months due to low valuations and improving macroeconomic conditions.

This shift suggests a potential rotation of capital away from U.S. markets, which have dominated recent growth, toward European assets that are currently considered undervalued.

Sharon Bell, a European portfolio strategist at Goldman Sachs Research, said the outlook in an interview recorded on June 4, 2026 ^[1]. The analysis indicates that several factors are aligning to favor the region, including a strengthening outlook for China and a strong fiscal backdrop within Europe [2, 3].

Valuation remains a primary driver for this bullish sentiment. Analysts said that the Eurozone is currently the cheapest equity market compared with any time before the COVID-19 pandemic ^[2]. This pricing gap makes European stocks more attractive to investors seeking value relative to the higher premiums often found in U.S. indices.

Institutional forecasts support this trend. Deutsche Bank previously upgraded its stance to overweight on European equities, forecasting that the STOXX 600 index could reach 650 by the end of 2026 ^[3].

However, the path to outperformance may not be linear. Market data from late 2025 showed muted performance for European shares, where gains in resources were offset by losses in the technology sector ^[4]. Despite these fluctuations, the combination of a potential U.S. economic slowdown and cheap Eurozone entry points continues to drive the overweight thesis [2, 3].

Investors are monitoring whether these fundamental advantages will translate into consistent gains throughout the remainder of the year, as the region attempts to close the valuation gap with its Atlantic counterparts.