Citibank and BNP Paribas bet that the European stock market's "golden period" has passed, and the next phase will be a period of sideways struggle.

According to the latest views of European market strategists from institutions such as Citigroup Inc. and Societe Generale SA, risks such as the tension in US-China trade relations, increasing debt in developed countries, and Trump's unpredictable tariff policies are dampening market sentiment. The strong performance of European stock markets since 2024 will be difficult to achieve larger substantial gains this year, and it is predicted that the "golden period" for European stock markets in recent years has passed, and they will likely enter a period of sideways volatility at least until early next year. According to a survey of 18 European stock market strategists, these strategists generally expect the European stock market benchmark - the Stoxx Europe 600 index - to be around 560 points by the end of the year. This is consistent with last month's survey results, implying a potential decline of about 1% from Wednesday's closing level. Strategists from Natixis even predict that the benchmark may drop to 530 points, while Citigroup strategists' latest forecast is a cautious 570 points. "We believe that there is only moderate upside potential in the European market, as the latest news from China and the US combined with the earnings season could be sources of volatility." Citigroup strategist Beata Manthey said, adding that she is relatively optimistic about the prospects until mid-2026. "Sustained upward movement is dependent on strong earnings expectations being met." For most of this year, European stock markets have been restrained within a narrow range by the tension brought on by US tariff policies and long-term political crises in France. Due to relatively small exposure to artificial intelligence, Europe has lagged behind the global stock market rally driven by AI investments. The Stoxx 600 index finally reached a new record high this month, but even when denominated in local currencies stronger than the US dollar, it has barely kept pace with the S&P 500 index. Meanwhile, Washington and Beijing are once again caught in a trade dispute, reigniting concerns about macroeconomic slowdown. The connection between the European market and global economic health is particularly close, as its industries such as semiconductor equipment supply, mining equipment, and automotive manufacturing are important parts of the global supply chain. Strategists tracked by institutions expect a slight decline in overall earnings of Stoxx 600 index components in 2025, followed by an 11% growth in the next year. However, there are still reasons to be optimistic about the short-term outlook for European stock markets. With French Prime Minister Sebastian Le Cornu surviving two no-confidence motions on Thursday, the political outlook in France appears to be stabilizing. Investor positions are not as crowded as in the US tech sector, and overall valuations of European stock markets are roughly in line with long-term averages. A survey by Bank of America shows that if investors cut their holdings in European stocks too much, more investors are worried about missing out on a potential rebound. Most respondents expect European stock markets to rise in the short term. JPMorgan strategist Mislav Matejka raised his rating on European stock markets earlier this month. While he maintains the year-end target at 580 points - implying only a further potential gain of 2%, he is willing to take advantage of the consolidation of stocks in the region. Seasonal trends also favor year-end rebounds. Statistics show that the Stoxx 600 index has averaged a 3.6% rise in the last three months of the year over the past decade, making it the strongest performing quarter for the index. "More potential for a rebound is seen because positions are clearer, relative valuations are back to low levels, the bubble in the German market has been squeezed out, the euro is stabilizing, and external fundamentals may continue to improve," said Emmanuel Cau, strategist from Barclays. However, his year-end target for the European benchmark index is only 570 points, which would keep the index flat with its current level. Strategist teams from UBS Group AG maintain the most bullish target point - 600 points, but this only implies a potential rise of around 6% for the Stoxx Europe 600 index, much weaker than UBS's strong potential upside forecasts for US stocks. On the other hand, TFS Derivatives' expectations are more pessimistic, maintaining its forecast for the European Stoxx 600 index at only 500 points, unchanged since August, although the benchmark has risen by about 3% since then. Other European market strategists remain cautious about year-end rebounds. "Given political and geopolitical uncertainties, as well as a lack of positive earnings growth momentum, we still expect market pressures to sell off before the end of the year," said Roland Kaloyan, head of European stock strategies at Societe Generale. Natixis' target point for the Stoxx 600 index is only 530 points, implying a nearly 7% decline in the index. "However, we are more optimistic for 2026, as a certain scale of fiscal stimulus and accommodative monetary policy may support the expansion of European stock market valuations," Kaloyan said.