Report published September 2, 2026
European Equities: Strong Micro Meets Challenging Macro – Goldman Sachs Strategy
Source and citation context
- Issuer
- Goldman Sachs
- Report date
- September 2, 2026
- Analysis as of
- Not stated in source
Authors / editors: Sharon Bell, Guillaume Jaisson, Peter Oppenheimer, Elena Porfidia, Jacinta Feng
Finvaulta summarizes Goldman Sachs's analysis. Attribute opinions, forecasts, time-sensitive values, and chronology to the issuer and report date; do not treat this page as an independent verification or a current market-data source.
European equities have demonstrated strong micro fundamentals with 2026 EPS growth upgraded to 15%, supported by attractive FCF yields and low concentration relative to the US. However, challenging macro conditions—including rising bond yields, 2027 French election risks, and energy supply uncertainties—lead Goldman Sachs to forecast a modest 7% 12-month return (STOXX 600 at 695) and advocate a balanced sector barbell.
Key Takeaways
- 1.Goldman Sachs raises its top-down 2026 European EPS growth forecast to 15% and projects STOXX Europe 600 at 695 over 12 months (7% price return), followed by a normalisation to 5% EPS growth in 2027.
- 2.Europe offers compelling valuation and diversification benefits vs. the US, trading at a 12-month forward P/E of 14.5x and a free cash flow yield of 5.3% (vs. <2% for top 10 US stocks) with lower concentration risk and low cross-correlations.
- 3.Three key macro risks weigh on sentiment: rising bond yields eroding the equity dividend yield advantage, 2027 European election risks (especially French presidential elections and OAT spreads), and potential energy supply shocks from Middle East disruptions.
Table of Contents
- European Equities: Strong Micro Meets Challenging Macro
- Europe offers Value and Diversification
- The three pain points: Rates, Elections and Energy shock
- Sector Views: Balanced mix of Cyclicals and Defensives
- 1. AI Still Winning
- 2. The CAPEX Supercycle
- 3. Cash is King
- 4. Cheap for a Reason
- Disclosure Appendix
Report data
Exhibit 19: Europe Sector Recommendations
| Metric | Estimate | Context |
|---|---|---|
| STOXX Europe 600 12-Month Target | 695.0 index points | Goldman Sachs' 12-month price target representing a 7% price return. |
| Europe Top-Down EPS Growth Forecast | 15.0% | Raised from 10% to 15% due to strong 1H earnings and energy boost. |
| Europe Top-Down EPS Growth Forecast | 5.0% | Expected normalisation as energy earnings diminish and input costs weigh on margins. |
| Europe 12-Month Forward P/E | 14.5 x | Europe trades slightly above its long-term average but inexpensive vs US. |
| Europe Free Cash Flow Yield | 5.3% | European average FCF yield vs less than 2% for the 10 largest US stocks. |
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Authors / Editors
Reported Data Context
- STOXX Europe 600 12-Month Target: 695.0 index points (12-month forward) · Source: Goldman Sachs Global Investment Research
- Europe Top-Down EPS Growth Forecast: 15.0 % (2026) · Source: Goldman Sachs Global Investment Research
- Europe Top-Down EPS Growth Forecast: 5.0 % (2027) · Source: Goldman Sachs Global Investment Research
- Europe 12-Month Forward P/E: 14.5 x (12-month forward) · Source: Datastream, FactSet, Goldman Sachs Global Investment Research
- Europe Free Cash Flow Yield: 5.3 % (Current) · Source: Bloomberg, Goldman Sachs Global Investment Research
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