Moderate growth in the area of tension between inflation and politics

In 2026, Europe will find itself in an environment of moderate growth with increased inflation and interest rate pressure. The markets appear fairly valued, meaning that selective investments with a focus on quality and pricing power remain crucial.

Economic & monetary policy

The growth prospects for Europe remain subdued. The European Central Bank expects GDP growth of just 0.9% in 2026, having recently revised its forecast downwards. At the same time, the labor market is likely to deteriorate slightly, with an expected unemployment rate of around 6.3%. Leading indicators such as the PMI continue to signal expansion, but without clear momentum.
On the interest rate front, a more restrictive stance is emerging: For the second quarter of 2026, the deposit rate is likely to stabilize at an elevated level or increase slightly, driven by persistent inflationary pressure, particularly in the energy sector.

Companies & valuations

European companies' earnings performance is likely to be moderate in 2026. Analysts expect earnings growth of around 3-5%, while sales are likely to increase only modestly due to a strong euro and global uncertainties.
Valuation-wise, European equities are currently trading at an elevated level (approx. 15x forward earnings). Europe is therefore no longer considered cheap, but remains attractive in relative terms - particularly compared to the US.

Currencies & political factors

The euro is expected to appreciate in the medium term (EUR/USD approx. 1.20+), which could dampen export momentum.
Geopolitical tensions, particularly in the Middle East, and trade policy uncertainties remain key risk factors. At the same time, rising fiscal spending in Europe is having a supportive effect.

GDP growth 2026 +1.4%

EU inflation 2026 + 2.5%

Current 3-month Euribor + 2.1%

Maria Albericci, Managing Partner

_{Sources: ECB, Bloomberg consensus, research by leading investment houses (as at Q1 2026)}

_{As at: 23.03.2026}