(Bloomberg) — Goldman Sachs Group Inc. strategists cut their targets on European stocks due to the expected hit from President Donald Trump’s tariffs, making a contrarian bet at a time when the region has beaten US peers by a record.
The team led by Sharon Bell now expects the Stoxx Europe 600 Index ( ^STOXX ) to trade at 510 points in three months, compared with their previous estimate of 560, as they assume US levies would be higher than anticipated. The new target implies a drop of 4.5% from Monday’s close.
The reduction also reflects projections of weaker US and European economic growth, Bell said.
“Recessions typically combine with corrections in stocks, and while the European market has been resilient in this latest period of lower US index performance, we find that historically European corrections are strongly tied to US market declines,” she wrote in a note.
Bell’s view is at a sharp contrast to growing optimism about European stocks this year. The Stoxx 600 just wrapped up its biggest-ever quarterly outperformance of the S&P 500 in dollar terms. The bullish sentiment has been driven by bets on higher fiscal spending, a potential ceasefire in Ukraine and a stabilizing political outlook.
Nearly half the strategists in a Bloomberg poll last month raised their end-2025 target for the benchmark index. Citigroup Inc.’s Beata Manthey — who first predicted the European rally in October — has also said there’s more gains in store for Europe.
In the US, however, strategists have sounded the alarm on the hit from tariffs, with Goldman’s David Kostin slashing his year-end target for the S&P 500 for a second time this month.
Trump will disclose his reciprocal tariff push on Wednesday during an event in the White House Rose Garden, his top spokeswoman said, adding that the announcement would feature “country-based” tariffs. European sectors such as automakers and miners could have big exposure to any levies.
Goldman’s Europe team also trimmed its 12-month target for the stock benchmark to 570 from 580. The new target still implies a record high for the index, as they expect the tariffs to be partly offset by lower rates and higher fiscal and defense spending over the coming years.
“We also continue to argue that Europe’s relative discount to the US provides some cushion and longer-term positioning in Europe is low,” Bell said.
—With assistance from Sagarika Jaisinghani.
