European Equities at a Turning Point: Valuations, Sovereignty, and Sentiment Align

Allianz Global Investors’ Q3 2025 European Equity Outlook examines the case for increasing exposure to European equities amid improving earnings prospects, relative valuation appeal, and structural tailwinds.

• Valuation support remains strong: MSCI Europe trades at a 35% discount to the S&P 500—well below the 20-year average—even after YTD outperformance.

• 2026 earnings momentum building: Earnings growth in Europe is expected to accelerate to 12%, outpacing the U.S. and narrowing the transatlantic performance gap.

• Sovereignty drives investment themes: Strategic spending on defense, AI, and infrastructure positions Europe for long-term competitiveness and reallocation flows.

How are investors responding to Europe’s improving fundamentals and geopolitical repositioning? The full report outlines thematic and tactical implications for asset allocators.