Are commodity-driven earnings enough to support European equities? Goldman answers

Goldman Sachs boosted its 2026 STOXX Europe 600 earnings growth forecast to 10% (from 5%), driven mainly by commodity-sector upgrades, and set a 12‑month STOXX Europe target of 625 (implying ~5% total return). The bank warns that European equity moves have tracked oil and gas and that each 1% rise in oil prices reduces European equities by about 20 basis points through valuation compression. Outside commodity sectors earnings look weaker, and Goldman expects energy earnings to fall in 2027. Europe’s forward PE of 14.4x remains well above the 2022 trough of 10.4x. The bank highlights a rotation into capital‑intensive sectors (infrastructure, energy, industrials) which have outperformed, flags stagflation risks while the Strait of Hormuz is disrupted, and recommends overweights in Banks, Technology and Defense.