• Barclays projects continued equity market gains in 2026, driven by 8% European EPS growth and a persistent AI investment cycle.
  • The bank sets a Stoxx 600 target of 620, implying roughly 9% upside, citing Europe's cheaper valuations and expected monetary easing.
  • The bullish outlook aligns with Barclays' own robust financial performance and upgraded 2025 profitability targets.

Barclays has laid out an optimistic case for global and European equities heading into 2026, forecasting that markets will continue to climb on the back of solid corporate earnings, technological tailwinds, and a supportive shift in monetary policy. The bank's analysis, coming from one of Europe's largest financial institutions, points to a favorable environment for stocks even as investors navigate lingering economic uncertainties.

Central to the forecast is the expectation that corporate profitability will lead the charge. Barclays projects European earnings per share (EPS) to grow by 8% next year, a significant driver for equity valuations. This confidence in earnings resilience comes alongside the bank's view that the artificial intelligence investment cycle, which has powered significant market gains in recent years, is far from over. The ongoing capital expenditure in AI infrastructure and applications is seen as a durable source of support for technology and related sectors.

"We see the combination of earnings momentum and a supportive policy backdrop as key pillars for the market," said a senior strategist at the bank, who spoke on the condition of anonymity as the detailed report is not yet public. The strategist added that while geopolitical risks remain, the fundamental picture for corporates is strengthening.

Monetary policy is the other critical piece of the puzzle. Barclays anticipates additional interest rate cuts from the Federal Reserve and other major central banks globally in 2026. This expected easing would reduce borrowing costs, improve the present value of future earnings, and generally make equities more attractive relative to fixed income. The shift comes after a prolonged period of tightening designed to combat inflation, which has weighed on valuations.

Specifically on European markets, Barclays sees a compelling value opportunity. The bank has set a year-end 2026 target of 620 for the Stoxx 600 index, which implies approximately 9% upside from current levels. This bullish call is predicated on Europe's cheaper valuations relative to U.S. markets and an expectation that lagging sectors will begin to catch up, provided the AI cycle remains intact.

The bank's upbeat market view coincides with its own strong operational performance. Barclays recently reported a 28% year-over-year increase in profit before tax for the second quarter of 2025, reaching £2.5 billion. Despite some one-off charges in Q3, the bank upgraded its full-year 2025 guidance for Return on Tangible Equity (RoTE) to greater than 11% and reaffirmed its 2026 target of greater than 12%. A rising equity market environment would directly benefit key divisions like its Investment Bank and Private Banking & Wealth Management unit, which already achieved a 31.9% RoTE in Q2.

Of course, the outlook is not without its caveats. The forecast assumes that inflation continues to moderate, allowing central banks to proceed with cuts, and that corporate earnings growth materializes as projected. Any resurgence of inflationary pressures or a deeper-than-expected economic slowdown could disrupt this trajectory. For now, however, Barclays is positioning for gains, betting that the pillars of earnings, innovation, and policy will hold firm through next year.