What would it take for Europe to outperform? JPMorgan weighs in

JPMorgan says European equities have recovered to near year-to-date highs but are unlikely to break out sustainably unless several macro and geopolitical conditions improve. The bank argues that the Iran conflict has weighed on Europe more than other regions, while the ECB’s expected tightening is not seen as the start of a prolonged hiking cycle. For Europe to outperform, JPMorgan sees catalysts such as a dovish U.S. Fed pivot, materially lower oil prices in 2H next year, signs of Chinese recovery, progress on German fiscal stimulus, easing Russia-Ukraine tensions, and a more durable rollover in Magnificent 7 stocks. Despite near-term headwinds, the bank still expects Europe to reach fresh highs in 2H and says geopolitical dips remain buying opportunities, especially in low-volatility stocks.