This is attributed analysis, not investment advice.

After years of telling clients Europe is cheap, J.P. Morgan is now betting it's about to deliver. The bank has raised its year-end 2026 price targets for Europe's three headline equity indexes, citing an expected pickup in company profits, Investing.com reported.

The new targets

J.P. Morgan now sees, by the end of 2026:

  • the STOXX 600 — the pan-European benchmark of 600 large companies — at 680, up from 630, about 7% above its recent level near 636;
  • the MSCI Eurozone index at 420, up from 385, roughly 10% of implied upside; and
  • the UK's FTSE 100 at 11,000, up from 10,300, around 5% higher than its recent ~10,500.

A price target is a strategist's estimate of where an index will trade by a set date — a forecast that bakes in assumptions about earnings and valuation, not a guarantee.

The reasoning: earnings, finally

The upgrade rests mostly on profits. J.P. Morgan sharply raised its earnings-per-share (EPS) growth forecasts: for the Eurozone, to 18% for 2026 (from 13%) and 12% for 2027; for the UK, to 18% for 2026 (from just 8%). The bank framed it as "accelerating earnings growth and the prospect of broader market participation" after, in its words, "three weaker years" — meaning gains driven by more than just a handful of stocks.

Helping the case, the bank pointed to a friendlier backdrop: lower oil prices (a relief after the Middle East scare earlier in the year), rangebound bond yields, and inflation expectations staying anchored. Tamer inflation and steady rates give equity valuations room to hold up rather than compress.

The long 'Europe is cheap' debate

The call plugs into a years-old argument. European stocks trade at lower valuations than their US counterparts — the STOXX 600's forward price-to-earnings multiple sits well below the S&P 500's — and bulls have long said that gap should close. The catch has been that Europe's cheapness often reflected genuinely slower earnings growth, leaving the discount stubbornly in place while US megacap tech powered ahead. J.P. Morgan's wager is that 2026 is when European earnings actually show up to justify a re-rating, helped by easier year-on-year comparisons after a soft 2025.

The caveats

Treat it as one bank's view, not a consensus or a sure thing. Index targets are forecasts, and the recent past is littered with optimistic European earnings calls that didn't pan out. The risks are familiar: a flare-up in geopolitics (the Middle East truce is fragile), another energy shock, weaker growth, or a stronger euro that eats into the overseas earnings of Europe's big exporters. And a target implying high-single-digit upside leaves little cushion if profits disappoint.

Why it matters

Still, the upgrade is a useful signal of where some of Wall Street's strategists think the value lies as the second half of 2026 begins: not only in the crowded, expensive US AI trade, but in a European market that has been underweighted for years. Whether the long-promised European earnings rebound finally arrives — turning a perennially "cheap" market into a rewarding one — is the question J.P. Morgan has just put a number on. As always, a forecast is a hypothesis, not a fact, and the earnings will be the judge.