Deutsche Bank has upgraded its outlook on European equities relative to U.S. stocks, projecting 12–16% upside for major European indices through 2026. The bank cites improving macro conditions, an earnings rebound, and a potent fiscal boost from Germany as key drivers. Strategists at DB argue that low investor expectations and undemanding valuations create room for positive surprises.
Germany’s recently approved 2025 budget is viewed as a turning point: stimulus is shifting from promise to execution, which could rekindle manufacturing momentum and strengthen Q3 company guidance. Meanwhile, trade pressures have eased after the EU struck a deal with the U.S. On the earnings front, Deutsche forecasts 10–12% growth next year.
Autos, Energy, and Materials — which hurt performance in 2025 — are expected to stabilize or turn tailwinds in 2026, supported by strength in Health Care, Financials, and Industrials. Small- and mid-cap stocks, particularly in Germany, are seen as especially attractive, given their relative discount and sensitivity to manufacturing recovery.
Deutsche Bank now claims that a 15-year underperformance streak by Europe relative to the U.S. may be ending. It still sees value in U.S. equities, but points to rising concentration risk, fiscal strain, and elevated valuations there as reasons to tilt toward Europe
