The heady optimism of the past year in European equities gave way to some cold realities in 2026, according to the region’s top sell-side firms.

2026 began with a positive outlook towards European equities, supported by expectations of dovish central banks, regional fiscal stimulus, and receding trade headwinds, confirmed Sophie Warrick, head of EMEA equity research and global head of research client engagement at J.P. Morgan, but geopolitical uncertainties soon took over.

“The onset of the Iran war brought most of this to a halt, with commodity-driven inflation back in the picture and markets beginning to price rate hikes rather than cuts,” she said. “Indeed, the ECB recently raised policy rates.”

But, even while European equities have been volatile this year, the Stoxx600 has nevertheless gained 7% so far, after appreciating 17% in 2025, said Eric Lopez, head of European equity research at BofA Securities.

“The market got off to a strong start, gaining 7% in just two months, but this trend reversed with the Middle East conflict as oil prices spiked, and at one stage the Stoxx 600 declined 12% from its highs in late March,’ he said. “However, with the push towards a conflict resolution and with positive earnings trends, European equities have now recovered nearly all of the losses.”

From a sector perspective, the oil & gas and basic resources sectors have both seen over 25% gains this year, while sectors exposed to the still-dominant AI infrastructure theme have also led the gains, such as technology hardware, telecoms and electrical equipment.

Which all means that after a very strong prior year, 2026 has been characterized by more selective performance and a greater dispersion of returns across sectors and markets, said Gareth Jenkins, head of EMEA Research at UBS.

“The bright spots have been areas with clear earnings visibility and structural growth drivers, such as semiconductors/AI/data centers/disruptive new entrants causing dramatic sub-sector rotation—e.g. away from SaaS and autos stocks for example—while the main challenges our clients have faced have been continued geo-political risks and macro uncertainty—the potential for higher-for-longer rates, and oil prices,” he said.  “Another bright spot has been the reemergence of companies coming to the equity market.”

Equity markets remain remarkably resilient, but against a developing and multifaceted backdrop, according to Rupert Jones, European head of equity research at Barclays.  This includes the durability of earnings and the continued scaling of the AI trade, which is maturing from early hype into more tangible deployment and monetization.

“At the same time, obstacles have become more deep-rooted. Geopolitics and supply chain dynamics continue to drive volatility, while parts of the market still appear frothy, requiring a disciplined and increasingly hedged approach,” he said. “Previously defined tail risks are now an entrenched part of the base case, creating greater dispersion and placing a higher premium on selectivity and conviction. For the remainder of 2026, we see this mix of volatility and opportunity as a catalyst for deeper client engagement, with a heightened focus on quality, conviction-led research, in an AI-driven world.”

It has been a year that has rewarded active stock selection, confirmed San Dhillon, head of EMEA Cash Equities Research at BNP Paribas.

“Despite ongoing geopolitical uncertainty, investors remained focused on earnings resilience, AI-driven investment cycles and market breadth—or lack thereof,” he said. “We saw strong demand for differentiated research that could identify the beneficiaries and bottlenecks of these structural themes.”

The firms meeting this demand have been recognized in Extel’s annual ranking of Europe’s top research teams based on the opinions of more than 5,900 portfolio managers and analysts at 1,1910 institutions with major securities holdings in Europe.

In the overall survey leaderboard there once again a two-way tie for first place. BofA Securities and J.P. Morgan share this year’s crown with a total of 37 first positions. Barclays jumped up two spots to take third place along with UBS who is up one spot. Jefferies and BNP Paribas placed fifth and sixth, respectively. Notably, BNP Paribas captured 21 Top-3 teams overall—the joint highest in Europe along with UBS—and 20 Top-3 industry teams, the strongest showing in the survey.

The market crucible of 2026 has affected sell-side research and had providers evolving their approach to the region. J.P. Morgan’s Warrick credited the speed and depth of her team in helping meet clients’ needs this year.

“The speed with which markets adapted to changing inflation expectations and the direction of rate moves drove greater focus on second-derivative impacts,” she said. “Our teams quickly addressed questions that went beyond broad sector views, to how companies within each sector were positioned on a more individual basis, helping clients identify opportunities where stocks had been unduly punished and where subsequent challenges may not have been appropriately priced in. This relied on bottom-up, timely updates from our teams, rooted in their expertise not only on the companies themselves, but also on previous cycles and investor positioning—elements that continue to be the cornerstone of our franchise.”

This hinges on analysts’ ability to understand how best to add value to clients’ investment processes at times of peak uncertainty and continues to define J.P. Morgan’s research teams, she added. “These are also the times when opportunities can arise due to pricing dislocations. Timely analysis in the Tech Hardware space from Sandeep Deshpande pointed clients towards under-appreciated, AI-relevant opportunities in ASML, Nokia, and Infineon Technologies,” she said. “Our teams have equally excelled at signposting increased challenges that the market may be under-appreciating, such as David Perry pivoting to a Neutral rating on Rheinmetall due to his expectation of company-specific challenges, despite a consistently positive outlook for German defense spending.

BofA’s Lopez said consistency is key to remaining a top research team. “Our research offering has been consistent for several years and it is clear our investor clients appreciate that,” he said. “We strive to ensure our analysts are well positioned to provide valuable investment insights across all sectors and look to adapt accordingly. For example, this could entail leveraging our global research capabilities or building a differentiated corporate access event.”

This environment has reinforced the importance of differentiated, fundamental research and ensuring strong client connectivity through volatile times, said UBS’ Jenkins. “It has also necessitated a strong linkage between global thematic research, deep stock-specific, data-led analysis, robust and disciplined valuation rigor and understanding both macro and quant driven flows, factors which, at UBS, we hope we do well for our clients,’ he added. “In other words, UBS has been well-suited for such a market back-drop but it has meant we have super-charged our global thematic efforts with the launch of a new thematic framework.”

One factor that is often overlooked is the ability to remain agile and innovative as research evolves, Jenkins said, especially around the adoption of and use of AI and data.

“This encapsulates our approach to alternative data with UBS Evidence Lab, the growth of new client types with our quant offerings and continual evolution of platforms such as HOLT [the firm’s proprietary quantitative research and valuation framework],” he said.  “All of this provides the analysts and our clients with unique tools to inform their investment research and processes.”

Given the more complex macro environment, scenario analysis and global collaboration have become central to how Barclays European research team supports clients, according to Jones, which means taking a full-value chain perspective rather than viewing sectors in isolation.

“This has driven a more deliberate multi-asset, multi-regional approach, with closer collaboration with our US analysts, as well as with the credit and macro teams, to help clients interpret market dynamics more holistically,” he said.

Jones says the firm’s edge lies in combining thematics with deep primary research and global collaboration to deliver differentiated, bottom up fundamental insights. “We have a strong focus on ‘kicking the tires’: getting on the ground with private companies, meeting regional experts, and engaging across supply chains to test assumptions first-hand and uncover underappreciated investment catalysts,” he added. 

Alongside this, the firm continue to invest in talent, empowering analysts to take intellectual risk. “In an AI-driven world, this step-change towards more conviction-led research—grounded in high-quality human judgement—is where we believe we can truly differentiate,” he said.