Goldman Sachs expects 4% rise in European stocks
Goldman Sachs projects minimal upside for European stocks in 2025
βGoldman Sachs strategists expect a limited upside for European stocks in 2025, forecasting a modest 4% price increase and a 7% total return, down from 10% last year.Β
Key Takeaways
- European stocks are expected to have modest growth in 2025, with a 4% price increase and 7% total return.
- The economic slowdown is predicted to limit corporate revenue and profit growth in 2025.
- Shareholder returns and stock picking will be key drivers of performance, especially in high-dividend yield and low-valuation stocks.
Modest Growth Expected for European StocksΒ
Goldman Sachs predicts that European stocks will see only a modest 4% price increase in 2025, reflecting a lack of significant re-rating potential at the index level, reports Investing.com.
M&G Plc (MNG)Β share price dynamics (Oct 2024 - Jan 2025) Source: Investing.com
This forecast contrasts with the 10% growth seen in 2024. Strategists cite the already high stock valuations as a limiting factor, leaving little room for substantial gains across the market.
Economic Slowdown and Impact on Corporate PerformanceΒ
Goldman Sachs anticipates a slowdown in GDP growth for 2025, which is expected to constrain the growth in corporate revenues and profits.
BNP Paribas SA (BNPP)Β share price dynamics (Oct 2024 - Jan 2025) Source: Investing.com
With the macroeconomic environment slowing down, companies will likely face more challenges in achieving higher earnings, which could limit the growth potential in European stocks.
Focus on Shareholder Returns and Stock PickingΒ
Despite the broader slowdown, Goldman Sachs sees a favourable environment for stock picking, particularly in sectors with high dividend yields and strong buyback programs.Β
Companies offering dividends higher than local government bond yields, such as M&G Plc and BNP Paribas, are highlighted as attractive investments. Additionally, buybacks are seen as a strategic tool for companies to enhance shareholder returns, especially in segments where valuations are low.
While European stocks face limited growth in 2025, strategic stock picking, focusing on dividends and buybacks, will be key to delivering shareholder returns in a subdued economic environment.
βReminder,Β Goldman Sachs strategists are maintaining a positive outlook on Chinese stocks, projecting a 20% increase in major benchmarks by the end of 2025, despite the ongoing market turmoil.
