After months of stagnation, eurozone stocks are starting to rebound. European stock markets, which have lagged American and Asian markets for much of 2025, are showing new signs of strength. JP Morgan, one of the most important investment banks in the world, also believes in it, having decided to focus on Europe again.
According to the bank, the time to return to confidence in European securities has arrived. After a long period of uncertainty and firm prices, valuations have become more attractive and there are more and more elements that point to a new positive phase for eurozone markets.
After stagnation, a turning point for eurozone stocks
Since March 2025, the Euro Stoxx 50 index, the main “thermometer” of the eurozone economy and markets, had struggled to make progress, while other international markets reached new highs. A trend that had fueled the skepticism of many analysts, pushing global investors to prefer American or Asian assets.
Now, however, according to JP Morgan, the situation is changing and, after this long phase of consolidation, “valuations have repositioned themselves at much more attractive levels”, we read in the report released by the bank.
The improvement in the European outlook does not come out of nowhere but, again according to JP Morgan, the key factors that make the market more interesting today are the decline in Eurozone inflation, the ECB’s expansionary monetary policy and Germany’s fiscal support. But let’s go in order.
As regards Eurozone inflation, this, after exceeding 9% in 2023, fell steadily below 3% in mid-2025. And the decline, accompanied by signs of credit recovery, has reopened room for action for the European Central Bank. In fact, the Frankfurt institute has started a cycle of interest rate cuts, with the aim of relaunching growth and supporting investments. According to JP Morgan’s analysis, the ECB’s cuts could favor an improvement in the credit impulse, i.e. the dynamics of credit towards businesses and families.
And historically, a positive credit impulse translates into a strengthening of confidence indicators and PMIs (purchasing managers’ indices), anticipating an improvement in economic activity.
Finally, Berlin, which has always been accused of excessive prudence in public finances, is planning a series of fiscal stimuli linked to the climate transition and infrastructure investments. According to forecasts, “the impact of the German stimulus will become more evident in the coming years”, helping to reactivate domestic demand and give oxygen to the entire euro area.
Where capital moves
Another interesting aspect of JP Morgan’s analysis concerns the geographical and sectoral rotations that could accompany this awakening phase. The bank suggests that, after the long run of the Japanese market and the related overheating of valuations, many investors may move part of their capital from Japan to Europe, where stocks now appear cheaper and have greater upside potential.
Within the continent, an internal rotation is also hypothesized, with smaller amounts of money invested in Italian and Spanish shares, protagonists of a strong rally in the previous months, but greater attention to France, considered a market “laggard” and therefore potentially ready for a rebound.
In particular, analysts identify French banks as an interesting segment, following a period of underperformance compared to the rest of the European banking sector. A recovery in profitability, combined with an improving macroeconomic environment and the benefits of lower rates, could revive the appeal of stocks such as BNP Paribas, Société Générale or Crédit Agricole.
Opportunities and risks
“The combination of low valuations, a more favorable political environment and an improving economic outlook makes the risk-reward balance of the Eurozone more attractive today than in the past,” underlines JP Morgan. This means that the profit potential offered by European stocks now compensates in a more balanced way for the risks linked to global uncertainties.
Of course, several unknowns remain, such as geopolitical evolution, the impact of the 2026 European elections and the possibility that the global recovery remains fragile. But overall, the macroeconomic picture appears much more stable than a year ago.
