A Reuters poll suggests that European stocks may see a correction of 10% or more in the next three months before reaching record highs in 2026. About 54% of analysts foresee a downturn, up from 50% in November, following a strong market performance this year.

The STOXX 600 is expected to remain steady by the end of 2025 before climbing to 610 points by mid-2026. The Euro STOXX 50, which has outperformed due to gains in banking, software, and luxury stocks, is projected to decline by 6.5% before rebounding.

Experts cite high valuations, geopolitical risks, and global economic slowdowns as factors influencing the market. Bank of America’s Andreas Bruckner predicts a drop due to weaker profit forecasts, while others see European earnings improving by 2026.

Despite short-term risks, investors remain optimistic about future growth, supported by ECB rate cuts, increased defense spending, and a potential recovery in China. The valuation gap between European and U.S. stocks remains significant, with European equities trading at a 36% discount to the S&P 500.