Barclays strategist Emmanuel Cau forecasts limited upside for European stocks this summer amid mounting headwinds. Elevated market valuations, macroeconomic uncertainty, and seasonal patterns are creating conditions for muted price action. Meanwhile, as the analyst emphasizes, most positive catalysts are already priced in.
Analyzing investor sentiment, Cau highlights emerging ‘resilience fatigue’ across markets. While the absence of major negative catalysts continues to support current price levels, escalating volatility in trade-related newsflow is heightening trader anxiety. A strengthening euro further pressures the region’s export-heavy sectors, creating additional headwinds for European index upside.
Barclays maintains a cautious earnings outlook for European companies, anticipating stabilization this year. The bank projects an 8% earnings recovery by 2026, driven by improving economic fundamentals and government stimulus measures, particularly in Germany. However, further equity upside remains contingent on stronger economic momentum.