JPMorgan Chase and Citi Predict 7.60% Gains for Stoxx Europe 600 Index

JPMorgan Chase and Citi have both identified the Stoxx Europe 600 Index (SXXP) as an asset that will outperform the S&P 500 (SPX) for the remainder of 2025. This prediction comes as investors increasingly seek alternatives to US assets. According to a survey involving 20 market strategists, both banking giants anticipate that the improving economic outlook in the EU will drive the SXXP to outperform the S&P 500. JPMorgan has set the highest target for the SXXP, predicting it will reach 580 points in the coming months, while also forecasting a decline for the S&P 500. Citi, on the other hand, expects the SXXP to surge to 570 points this year, citing increased clarity on corporate earnings as a key factor. Citigroup strategist Beata Manthey noted that if earnings uncertainty has already peaked, it could pave the way for further upside and potential re-rating, particularly in cyclical sectors that have been more adversely affected.

The Stoxx Europe 600 Index tracks the performance of the 600 largest publicly traded firms across 17 European nations. As of the most recent trading session, the index was at 545 points, marking a year-to-date increase of approximately 7.60%. This outlook from JPMorgan Chase and Citi comes at a time when Ernst & Young (EY) has issued a warning about the S&P 500. EY's chief economist, Gregory Daco, has expressed concern that the S&P 500 is rallying without adequately accounting for the potential negative impacts of tariffs. Daco expects that tariffs will likely increase prices, thereby pressuring household demand and causing the US economy to lose momentum. He forecasts that the US economy will approach "stall speed" in the fourth quarter of 2025, with a year-over-year GDP growth of just 0.6%. Daco's analysis suggests that equity markets have reacted with unwarranted optimism, overlooking the persistent economic drag posed by elevated tariffs. As of the most recent trading session, the S&P 500 was at 5,802 points.

The differing views between the banking giants and EY highlight a broader debate among market participants about the future trajectory of US and European equities. While JPMorgan Chase and Citi are bullish on the prospects of the SXXP, EY's cautionary stance underscores the potential risks associated with tariffs and their impact on economic growth. Investors will need to weigh these competing perspectives as they navigate the complexities of the global equity markets. The divergence in opinions also reflects the uncertainty surrounding the economic outlook, with some analysts predicting a more favorable environment for European stocks while others remain skeptical about the sustainability of the current rally in US equities.