The Stoxx 600, Europe’s broadest stock index, has returned 10% so far in 2026, lagging the U.S. market’s 13.5% but still showing resilience. That resilience, according to Goldman Sachs, is part of a story most investors have missed.
European equities have historically struggled to spark the kind of investor enthusiasm reserved for U.S. stocks and certain fast-growing Asian markets. The continent has fewer high-growth companies, shallower capital markets, and a supposedly less compelling long-term earnings growth story. A spike in government fiscal spending early in 2025 brought the market to life, and this year the story has grown more nuanced.
The pan-European Stoxx 600 index tracks 600 large, medium and small capitalization companies across 17 European countries, essentially the continent’s equivalent of the S&P 500. It is up 10% in 2026 so far, slightly behind its North American counterpart, which has returned 13.5% over the same period.
Goldman Sachs, in a note from August 10, attempted to dispel some of the “myths” about investing in Europe. “Performance [in Europe] has been far more mixed than the market narrative, or most investors realize,” the analysts wrote. “Since 2022, European banks have considerably outperformed the Magnificent 7. Since the start of 2025, and despite both the tariff shock and an energy supply crisis, Europe’s Stoxx has outperformed the S&P 500.”
Another myth cited by Goldman is that Chinese competition is a major headwind for Europe’s companies. “The stock market is not the economy and the largest sectors, financials, pharma, tech, energy, utilities, telecoms, aerospace and defense, are not especially vulnerable to low-cost China imports,” Goldman added. “Autos are just 1% of Europe’s market cap.”
The European autos sector has been deeply maligned amid a years-long structural crisis. Slowing demand for electric vehicles, lost market share to Chinese competitors and higher borrowing costs have created a perfect storm over the past five years, with sales volumes remaining well below pre-pandemic levels. The Stoxx Autos index is down 16% year to date, with Volkswagen AG and Stellantis among the worst performers, falling 27.6% and 51.9%, respectively.
BNP Paribas believes Europe is more likely to benefit from AI than develop it, with the autos sector among those poised to gain. “At this point the sector is so cheap that no one is really thinking about the potential upside in there,” Sophie Huynh, portfolio manager and strategist at BNP Paribas Asset Management, told CNBC. “It’s about trying to understand when markets are going to start talking about this because you can sit on these deep value sectors for one or two years before the market consensus starts to realize it’s going to work.” Huynh added that a lot of good news about U.S. consumption is already priced in, “so the momentum of the U.S. economy is slowing down when Europe has just started to pick up.”
Goldman acknowledged that Europe lags behind on several fronts, including data center rollouts and frontier modelling, “all of which could have negatives for security or longer-term productivity and growth.” But the bank’s strategists said that being behind on the AI trade may not be such a bad thing. The market provides a hedge for investors worried about some of the risks around AI, especially around China competition, they wrote.
The message from Goldman is that Europe’s stock market is more complicated than the traditional narrative suggests, and investors who dismiss it outright may be missing opportunities. Whether the region continues to outperform remains to be seen, but the case for a closer look is growing.
