Overview#
Goldman Sachs has recently adjusted its growth forecast for Europe, now predicting a modest growth rate of 1% for the Euro area in 2026. This change comes as energy prices, particularly oil and gas, are expected to rise significantly, impacting the overall economic outlook.
Energy Price Predictions#
The brokerage's commodities strategists have revised their forecasts, estimating oil prices to average $77 per barrel and gas prices to reach 46 EUR/MWh by 2026. These higher energy costs are influencing not just European forecasts but also those for the U.S., where Goldman Sachs has lowered its GDP growth prediction for 2026 by 0.3 percentage points to 2.2%.
Inflation and Central Bank Policies#
Goldman Sachs anticipates that inflation in the Euro area will peak at 2.9% in the second quarter of 2026, up from a previous estimate of 2%. While the European Central Bank's policy outlook remains unchanged, the timing for potential interest rate cuts by the Bank of England has been delayed.
Sector Recommendations#
In terms of sector performance, Goldman Sachs has made several adjustments. They upgraded the Construction & Materials and Food, Beverage & Tobacco sectors to an 'overweight' status, indicating a more favorable outlook. Conversely, the Financial Services sector has been downgraded to 'neutral', and the Media sector has been marked as 'underweight', suggesting a less optimistic view.
Earnings Expectations#
Goldman Sachs projects a 5% growth in earnings per share (EPS) for the STOXX 600 index in 2026, which is significantly lower than the broader market consensus of 11%. Despite 67.8% of the companies in the STOXX 600 beating earnings estimates, the analysts caution that strong EPS performance does not necessarily translate to resilient stock prices.