Around one-third of asset managers active in Europe expect a comeback for European equities in 2026. They consider stocks from the region to be inexpensive and expect the planned large-scale European government investments in areas such as defense and infrastructure to act as a catalyst.
This is evident from Investment Officer’s Outlook Survey 2026, a study into the outlook for 2026 conducted among several dozen internationally operating asset managers.
When asked which category is set to make a comeback in 2026, a large share of asset managers point to Europe. Equities and bonds from emerging markets are also frequently mentioned by strategists and investors. Notably, beyond these two major categories, the dispersion among named comeback candidates is wide. From US value stocks to municipal bonds, and from pharmaceuticals to direct real estate, asset managers have highly divergent expectations in this respect.
“By region, Europe is the only major equity market trading at a multiple below early 2022 levels”
Lilia Peytavin, strategist at JP Morgan Asset Management
European equities started 2025 on a promising note, but fell back more sharply in April than their US counterparts. Over the full period from January to December, the US S&P500 is up around 16 percent, while Europe’s Stoxx Europe 600 is up nearly 14 percent. Several asset managers point to the “pause” Europe took this year in delivering its strong performance. M&G Investments specifically cites political unrest in France.
Nine of the 28 surveyed asset managers believe there is more upside for Europe in the coming year. “By region, Europe is the only major equity market trading at a multiple below early 2022 levels,” strategist Lilia Peytavin of JP Morgan Asset Management described the room for improvement. Roelof Salomons of Blackrock also pointed to the “discount” at which European equities are currently trading. “There is clearly potential for catch-up.”
“Markets are waiting for action following promises of increased defense and infrastructure spending”
Fabiana Fedeli, equity CIO at M&G Investments
Asset managers are primarily counting on a stronger macroeconomic foundation for European equities. Markets are waiting for action following promises of increased defense and infrastructure spending, according to equity CIO Fabiana Fedeli of M&G Investments. European equities could be supported by strength in the defense, energy, and financial sectors, said Luke Barrs of Goldman Sachs Asset Management. “Alongside potential recovery phases in currently underperforming areas.”
Vincent Mortier, group CIO of Amundi, specifically identifies financial institutions, industrial companies, defense, and sectors related to the green transition, as well as small- and midcap stocks, as “particularly attractive” in Europe. Nuveen also sees potential in industrial companies, defense-related firms, and financial institutions.
German ‘debt brake’
Within the European recovery narrative, Germany plays a prominent role. Strategists emphasize that the easing of Germany’s debt brake improves economic conditions in Europe, partly through additional fiscal space. “This unlocks substantial investments in defense and infrastructure,” said William Davies, CIO at Columbia Threadneedle. “While lower interest rates support peripheral economies.” Nuveen strategist Laura Cooper added: “That should be an important catalyst for European risk assets.”
DWS goes even further in its confidence in Germany. This asset manager does not crown Europe as a whole, but Germany specifically, as the comeback category of 2026. At the same time, DWS also expects a recovery in Japan, thanks to new leadership and reforms there, said CIO Western Europe Vera Fehling.
DWS is not alone in this view. Columbia Threadneedle, Capital Group, and Invesco also expect a resurgence in Japan in 2026. In addition to reforms in corporate governance, asset managers cite the attractive inflation environment and the recovery potential of the weak yen as reasons for opportunities in Japan next year.
Emerging markets: equities and debt
Alongside Europe, emerging markets are also seen as candidates for a recovery in 2026, according to a substantial group of asset managers. Economists Joeri de Wilde and Maritza Cabezas of Triodos IM noted that emerging market equities already performed well in 2025. “We expect this to continue in 2026.” Robeco is also positive on emerging market equities, as is Schroders. Schroders looks “beyond the big four,” focusing very specifically on Brazil. “Equity valuations are attractive, the real effective exchange rate is low, and real interest rates are very high, which justifies an overweight allocation,” equity strategist Tom Wilson wrote.
Capital Group also sees “selected” emerging markets as offering opportunities, but points to debt rather than equities. Feike Goudsmit said: “Latin America and Asia in particular offer attractive returns and diversification.”
Honorable mentions
Aside from these two frequently mentioned categories, which incidentally did not perform poorly in 2025, some asset managers put forward comeback candidates that still have a longer road ahead. Global direct real estate investments, for example, mentioned by Aberdeen. “The return cycle appears to be in the early stages of a sustainable upswing, supported by low supply levels and new thematic drivers such as data centers,” says Aberdeen’s chief economist Paul Diggle.
“Boring sectors such as food and real estate. The sectors’ underperformance is not in line with their earnings performance”
Corné van Zeijl, strategist at Cardano
Asked about the comeback category of 2026, Corné van Zeijl of Cardano responded: “Boring sectors such as food and real estate. Not very popular, but the sectors’ underperformance is not in line with their earnings performance.”
Finally, UK equities, mentioned by Pictet Asset Management. “Extremely cheap and supported by a weaker pound,” according to chief strategist Luca Paolini
Investment Officer Outlook Survey 2026
This article is part of a series of five and is based on a survey that Investment Officer sent in November to asset managers operating in Europe. The findings are based on written responses from strategists and investors at Aberdeen, Aegon Asset Management, Amundi, Blackrock, Capital Group, Cardano, Carmignac, Columbia Threadneedle Investments, Comgest, DWS, Fidelity International, Goldman Sachs Asset Management, Invesco, JP Morgan Asset Management, Legal & General Investment Management, M&G Investments, MFS Investment Management, Natixis Investment Managers, Northern Trust Asset Management, Nuveen, PGIM Fixed Income, Pictet Asset Management, RBC BlueBay, Robeco, Schroders, Triodos Investment Management, Van Lanschot Kempen, and Vanguard. Together, these asset managers are estimated to manage approximately 54.000 billion dollar in assets globally, more than 40 percent of the market.