Goldman Sachs Slashes STOXX 600 Forecast Again Amid Tariff Uncertainty and Strong Euro

Wall Street giant warns of further earnings downgrades for European companies as trade tensions, currency pressures, and sectoral slowdowns weigh on investor outlook

Goldman Sachs has lowered its 12-month forecast for Europe’s STOXX 600 index for the second time in April, citing growing concerns over U.S. tariffs, the euro’s sharp appreciation, and deteriorating earnings momentum. The brokerage now expects the pan-European index to reach 520, down from an earlier revised projection of 570 — and sharply below the initial 580 forecast issued earlier this month.

The downgrade reflects mounting headwinds for corporate Europe, with Goldman projecting a 5% year-over-year decline in first-quarter earnings per share (EPS) for the STOXX 600. “We anticipate further downgrades,” Goldman Sachs said in a client note dated Friday. “Historical trends between revisions and performance indicate that the market is currently factoring in a downward revision of more than 5 percentage points.”

The gloomy outlook follows recent U.S. tariff announcements, which, although postponed by 90 days, have unsettled market confidence. While European Union finance ministers have maintained a unified front in trade negotiations with Washington, Goldman said the uncertainty and potential escalation of trade barriers are casting a long shadow over earnings forecasts.

EPS Reversal and Currency Risk

Goldman Sachs now expects European EPS to shrink 7% in 2025, a dramatic reversal from its earlier estimate of 2% growth and far below the broader market consensus of 4% growth. The report highlights that about 60% of STOXX 600 revenues come from outside Europe, making listed firms especially vulnerable to currency fluctuations. The euro has appreciated roughly 10% year-to-date, further tightening margins for exporters and multinational corporations.

In addition to trade and currency dynamics, the brokerage pointed to lower energy prices, which could exert further pressure on the energy and basic resources sectors — traditionally key drivers of European equity performance.

Sectoral Outlook: Drags and Defenders

Goldman identified energy and financials as the two sectors likely to weigh most heavily on the STOXX 600 in the coming quarters. In contrast, technology and industrials may offer some resilience, driven by innovation cycles and infrastructure-related spending.

UK and Global Market Revisions

The firm also revised down its outlook for the UK’s FTSE 100, now forecasting 8,500 points over 12 months, down from its earlier target of 9,100. The revised forecast reflects broader caution across global markets.

Separately, Citigroup has downgraded U.S. equities to ‘neutral’ from ‘overweight’, signaling a more guarded stance on Wall Street amid rising U.S. recession risks. Citi also tempered its view on Japanese and emerging market stocks, suggesting a broad recalibration of global investment strategies.

Conclusion

With multiple macroeconomic forces converging — from trade tensions and currency headwinds to sector-specific slowdowns — Goldman Sachs’ latest forecast underscores a sobering outlook for European equities. Investors may need to brace for continued volatility and earnings downgrades as the region navigates a complex and evolving economic landscape.