Improving earnings momentum in Europe

Morgan Stanley now expects MSCI Europe earnings per share to grow by 16.9% in 2026, following a sharp series of upgrades in recent months. Even excluding the energy sector, expected growth remains a solid 13.4%.
This matters because European equities continue to trade at a meaningful valuation discount to the US market. Europe is also substantially less concentrated in a handful of mega-cap technology companies, offering broader exposure to financials, industrials, healthcare and consumer businesses.
Improving earnings, lower valuations and greater sector diversification provide an attractive backdrop for selective European equity investors.
This is also the investment universe of our SSF – European Value Fund, where we focus on fundamentally sound European companies trading below our assessment of their intrinsic value.
Could improving earnings finally become the catalyst for Europe’s valuation gap to narrow?