Barclays_European_Equity_Strategy_2026_Outlook_More_than_just_AI

Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companiescovered in its research reports. As a result, investors should be aware that the firm may have aconflict of interest that could affect the objectivity of this report. Investors should consider thisreport as only a single factor in making their investment decision.This research report has been prepared in whole or in part by equity research analysts basedoutside the US who are not registered/qualified as research analysts with FINRA.(iii) This author is a member of the EMEA Equity Research department who may publish equityand debt researchPlease see analyst certifications and important disclosures beginning on page 129.European Equity Strategy2026 Outlook – More than just AIAI may hold the fate of equities in 2026, but it is not the onlyshow in town. Dual fiscal/monetary stimulus should liftUS/EU GDP growth above trend, and help improve marketbreadth. Valuation cushion is limited, but Europe has easyearnings comps to help. 620 SXXP target, OW Cyclicals &Banks.2026 Outlook – More than just AIRegime change was our key theme for 2025, looking for Trump 2.0 to fuel more volatility butmore equity upside too. We weren't disappointed, as global equities have had another strongyear, up 18%, despite hiccups along the way, buoyed by the AI frenzy. This raises the bar forpositive surprises into 2026, as investors are increasingly worried about downside risks from AIand macro/geopolitical tail-risks abound. For now, we think equities will continue to climb thewall of worry, as the AI supercycle has legs, with capex backed by strong balance sheets andprofitability, while adoption is rising fast. But AI is no longer a one-way-trade, nor the only showin town: monetary/fiscal easing should lift US/EU GDP growth above trend, and help improvemarket breadth. Against this backdrop, we find EU equities well positioned to capture someEquity Research18 November 2025SIGNATUREEuropean Equity StrategyEmmanuel Cau, CFA+44 (0)20 3134 0475emmanuel.cau@barclays.comBarclays, UKMagesh Kumar Chandrasekaran, CFA+44 (0)20 3134 5983magesh.kumarchandrasekaran@barclays.comBarclays, UKEmmanuel Makonga+44 (0)20 7773 2593emmanuel.makonga@barclays.comBarclays, UKArihanth Bohra Jain+91 (0)22 6175 1406arihanth.bohrajain@barclays.comBarclays, UKCompleted: 17-Nov-25, 23:43 GMT Released: 18-Nov-25, 04:00 GMTRestricted - Externalreflationary tailwinds, given their cheaper valuation, lower crowding and easier earningscomps, without being overly dependent on the fate of the AI trade, although politics remain arisk. Mega trends also bring opportunities to diversify portfolios and explore new themes in AIinfrastructure, energy transition, resources resilience, space & quantum, and consciousconsumption. So if the AI boom doesn't end in tears and other parts of the market manage tocatch up, equities should be able to deliver decent and potentially front-loaded returns in 2026.This is what we are positioned