How far away that first quarter seems now, when Europe got off to a flying start, leaving Wall Street behind. It was an historic outperformance, driven by the German recovery and the boom in defense stocks.
This momentum subsequently reversed sharply. Wall Street regained the lead in a somewhat single-theme market centered around AI.
However, with a month and a half to go before the end of the year, Europe is, despite everything, almost on a par with Wall Street: the Stoxx600 has risen by 15% since January 1, while the S&P500 has gained 16.4%.
It is therefore entirely possible that Europe will outperform Wall Street in 2025. In any case, that is what JPMorgan is betting on: "We believe that the risk/return ratio in the eurozone is improving. We view the market consolidation seen over the past seven to eight months as constructive and expect the region to outperform its peers through the end of the year and beyond," wrote Mislav Matejka, head of European and international equity strategy at J.P. Morgan, in a note dated November 7.
The US bank's teams highlight three catalysts: better earnings growth in 2026, the return of GRANOLAS to the forefront and the stabilization of the French market.
Earnings growth is expected to reach 15% in 2026. European companies should benefit from a positive base effect (EPS contraction this year) and an improved macroeconomic environment (German recovery, stabilization in China).
Another factor that should help is the return of GRANOLAS, a group of 11 large-cap European companies (GSK, Roche, ASML, Novo Nordisk, Nestlé, Novartis, L'Oréal, LVMH, AstraZeneca, SAP and Sanofi). These stocks have underperformed their market by 25% since the beginning of 2024, despite posting fairly solid results.
Finally, JPMorgan expects French equities to stabilize. Since the beginning of 2024, they have underperformed the rest of the market by 15% amid significant political instability.
