The writer is publisher of the Wealth of Nations newsletter
Investors went into 2025 in a mood of deep gloom about the outlook for the European economy. Almost all fund managers started the year underweight European equities and few expected them to outperform. That proved a mixed call. The Eurostoxx 600 rose 15.5 per cent, only slightly underperforming the S&P 500, which was up 17.5 per cent. But for euro-based investors, a fall in the dollar meant they would have barely broken even on an investment mirroring the US blue-chip index.
Going into 2026, the mood is quite different. Bank of America’s latest European Fund Manager Survey shows that a net 78 per cent of investors expect stronger European growth in the next year, the highest since mid-2021. At the same time, 92 per cent project gains for European equities — a record high. Cash levels among European fund managers have dropped to a 12-year low of 2.8 per cent.