Eurozone equities

17 September 2026, 21:30 UTC Chief Investment Office GWM Investment Research

Eurozone equities CIO View: Eurozone equities Matthew Gilman, Head, CIO Europe Equity Strategy, UBS Switzerland AG Rolf Ganter, CFA, CIO Head of Europe Equities, UBS Switzerland AG

• We remain positive on Eurozone equities, supported by 1) a Global Asset Class Preference Attractive cyclical recovery in earnings, 2) a improved structural backdrop, and 3) still-reasonable valuations. Euro Stoxx 50 Stoxx 50 • Energy disruptions and higher interest rate expectations are a near-term headwind, but when this comes alongside an improving 15 Sep 26 6,252 economic backdrop, earnings growth can more than offset the effect Dec 26 6,900 of higher discount rates on valuations. Jun 27 7,100

• We continue to expect 15% earnings growth in both 2026 and Source: Refinitiv, UBS 2027. This year's growth remains driven by strong secular drivers, cost control, and high growth in commodities, whereas next year's growth should see a broadening across sectors as revenues rise more broadly.

• We favor a combination of cyclical and structural growth opportunities in the region. This supports our preference for European banks, consumer discretionary, health care, industrials, IT, and Germany, as well as our "European Leaders," "Luxury & Source: UBS Lifestyles," and "Swiss mid-caps in focus" themes.

• Absolute view: Attractive, Relative preference (in comparison to CIO themes other equity regions): Preferred. European Leaders Europe's leading companies that we believe are positioned to benefit from global trends and the region’s structural shifts. Central scenario Luxury & Lifestyles Our positive view on European equities is underpinned by 1) a cyclical We see multi-trillion-dollar opportunities recovery in profits supported by an improving manufacturing and emerging across "Luxury & Lifestyles" investment backdrop; 2) an improved structural backdrop with healthy segments, underpinned by global population private-sector balance sheets, strong banks, and supportive structural growth, rapid urbanization, robust wealth drivers, including AI, electrification, reshoring, and defense; and 3) still- creation, demographic shifts, and accelerating reasonable equity valuations. We believe these fundamental drivers remain digitalization. intact. Swiss mid-caps in focus The primary downside risks to our base case today come from weaker AI We tactically favor Swiss mid-cap equities investment, energy disruptions, or tighter policy in response to inflation. over Swiss large caps. The opportunity is While none form part of our base case, inflation and interest rates have both structural, due to the companies’ growth become a particular focus for markets given the recent debate around the profile, and cyclical, as economic conditions path of policy rates. Higher interest rates can weigh on equity valuations; improve.

This report has been prepared by UBS Switzerland AG. Please see important disclaimers and disclosures that begin on page 4.

but what generally matters most for equities is why rates are rising. When tighter policy reflects resilient economic activity, earnings growth can more than offset the effect of higher discount rates. Preferences Banks Importantly, Europe enters this debate with improving profit momentum. Consumer Discretionary After three years of stagnation, the earnings cycle is strengthening as Health Care manufacturing activity returns to expansion and investment picks up. Industrials Following strong first-half results, we upgraded our 2026 Eurozone Information Technology earnings forecast from 10% to 15% and continue to expect similar growth Germany in 2027. We therefore expect improving profits to remain the principal driver of returns and to help cushion risks from moderately higher yields. Note: This month, we have updated our multi- asset Asset Class Preference framework to History offers some reassurance. Across the last ten tightening periods, bring together two useful perspectives. We European equities were on average 5% higher after six months and 14% continue to display Absolute views (Attractive, higher after 12 months following the initial policy move. Rather…