Economic Growth Is Forecast to Drive a ‘Modest’ Rise in European Stocks This Year - Goldman Sachs

What the desk is arguing

Goldman Sachs' forecast highlights that stronger economic growth in Europe is likely to bolster stock prices modestly this year. This optimism could translate into a favorable environment for the euro, driven by increased capital flows into European equities as investors seek growth opportunities.

Moreover, with the European Central Bank maintaining an accommodative monetary stance, the supportive conditions could further enhance the attractiveness of European assets. The view Goldman presents implicitly challenges the notion that geopolitical tensions or inflation concerns will hamper market performance this year.

Where it sits in our coverage

Currently, our consensus target for the euro is 1.075 against the dollar, with a range between 1.04 and 1.12. This optimistic perspective aligns with Goldman’s view, suggesting a continued easing in monetary policy will support growth, thus prompting potential euro appreciation.

Analysts from other major financial institutions echo this sentiment, with targets indicating a similar bullish outlook:

• JPMorgan: 1.10
• Barclays: 1.08
• Goldman Sachs: N/A inferred from the commentary.

How other firms see it

While many firms support this general bullish stance, BofA diverges by positioning its target lower at 1.04, reflecting a more cautious outlook on the economic recovery and its impacts on currency valuations. They express concerns over persistent inflation and geopolitical factors that may hinder growth.

• BofA: contrary
• HSBC: aligned
• Deutsche Bank: aligned