Why Goldman Sachs is bullish on European stocks

April 21, 2021, 9:15 AM UTC

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Good morning.

Stocks, so far, have had a rough week, but are rebounding today. Dow and S&P 500 futures are modestly higher on Wednesday, while tech futures lag, dragged lower by Netflix.

In Europe, things look even better. Stocks are gaining across the board as the re-opening trade gathers momentum. In today’s essay, I examine why Wall Street is suddenly bullish on the European recovery story.

Before we get to that, let’s see what’s moving markets today.

Markets update


  • The major Asia indexes are mostly lower in afternoon trading with the Nikkei off 2% as Japan’s government mulls a state of emergency for Tokyo and Osaka as COVID cases spike.
  • A power outage in China’s remote Xinjiang region is shining a light on—this, being 2021—crypto currencies and the environment. Bitcoin mining is powered by a staggering amount of coal, and China is the undisputed king of burning fossil fuels to grab crypto gold.
  • Speaking of emissions… Global CO2 emissions are expected to soar 5% this year, the second biggest year-on-year increase ever.


  • The European bourses were higher out of the gates, with the Stoxx Europe 600 gaining 0.4% at the open. That’s after European stocks had their worst day of 2021 yesterday.
  • Shares in Heineken were up 4% in early trading after the brewer reported solid beer shipments, which beat estimates. Can a trip back to the pub be that far behind?
  • Soccer’s Super League is kaput after a number of high-profile defections from English clubs yesterday forced the organizers to put the breakaway organization on ice. Juventus shares are down 11% on the news, this Roma fan types with a big fat grin.


  • U.S. futures are mixed, with tech futures in the red. That’s after the three major averages sunk for a second straight day, with the Dow suffering its worst loss in nearly a month.
  • Netflix shares are down nearly 9% in pre-market trading (though off even steeper declines) after the streaming giant reported a huge miss on subscriber numbers and a lackluster outlook.
  • Another stock to watch is United Airlines. The carrier fell 8.5% on Tuesday after reporting a fifth straight quarterly decline. There’s turbulence across the sector. “Corporate travel might not get back to normality, perhaps ever,” a Citigroup equities analyst told Fortune yesterday.


  • Gold is up, trading above $1,780/ounce.
  • The dollar is flat.
  • Crude is down with Brent trading around $66/barrel.
  • Bitcoin is gaining, up to $55,300. Meanwhile, Dogecoin—woof, woof—is down nearly 20% in the past 24 hours. But with a market cap of about $42.5 billion, the parody alt-coin is still bigger than the likes of General Mills, eBay and Palantir.


The bull case for Europe

The broad-based decline in stocks over the past two days may come as something of a puzzler to you, particularly considering how rosy the outlook is for the broader economy.

Economists see big numbers coming out of the biggest economies in the months to come. That’s not just forecast, that’s fast becoming fact.

As we covered yesterday, such growth rewards certain sectors. As Lisa Shalett, CIO at Morgan Stanley Wealth Management, instructs, “tilt toward pro-cyclical, non-US, short duration, value and quality factors.”

A few hours after I published yesterday’s Bull Sheet, another investor note, this time from Goldman Sachs, hit my inbox that expounded upon something Shalett pointed out: the appeal of non-U.S. stocks.

“We see more upside to European growth pricing ahead,” the Goldman equities team writes, adding that the eurozone, after a slow start, is making gradual progress in its vaccination efforts. “In short, we now expect the vaccine-led boost to asset prices we saw in the United States to broaden to Continental Europe.”

To that end, Goldman sees the euro recouping most (if not all) its Q1 losses against the dollar and it sees the STOXX Europe 600 delivering 10% total returns over the next 12 months.

With Europe back on track, joining China and the U.S. in solid-growth mode, that will impact commodity prices in a big way, Goldman forecasts. Expect Brent crude to climb to near $80/barrel, and for copper to gain to multi-year highs.

With commodity prices on the rise, that means inflation expectations are marching higher, particularly in the U.S. In Europe, inflation has run much cooler over the years, and so there’s less concern of rising prices on this side of the Atlantic slamming equities here.

That all points to a bull case for Europe.

“Our bias at this point is to lean into European strength,” Goldman concludes.



According to legend, Rome was founded on this day a mere 2,774 years ago. You may recall that the founding story of Rome involves twin brothers, the mythological duo Remus and Romulus, who were nourished as infants by a she-wolf.

Years later, Romulus killed Remus over—what else?—a property dispute. That slaying, the legend goes, happened over on the Palatino hill, not far from where I’m writing today’s newsletter.

With the pandemic, this year’s birthday festivities will be held online—too bad as it’s shaping up to be a lovely day here in the Eternal City.

Buon Natale di Roma!


Bernhard Warner

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

Today's reads

$60K price target. Bitcoin is more than 10% off its all-time high, reached last week, trading this morning just north of $55,000. But analysts say the number to watch is $60,000. Unless BTC breaks that level some time soon, there could be problems ahead, says JPMorgan Chase analyst Nikolaos Panigirtzoglou.

Wood-a, could-a, should-a. Wall Street has been obsessing (as has yours truly) on this one commodity that's been messing with the housing market: lumber. On Friday, the price of "board feet of lumber" hit yet another all-time high, jacking up the cost of a new-build. Sorry, house hunters.

Everything Apple. Investors weren't all that impressed with Apple's first hardware event of 2021, sending shares down nearly 1.3% on Tuesday. But that's not to say there was nothing interesting to come out of the big unveiling yesterday. Fortune's Aaron Pressman lays out all the new Apple goodies, including new iMacs, a new iPad Pro and a new Apple TV set-top box.

Some of these stories require a subscription to access. There is a discount offer for our loyal readers if you use this link to sign up. Thank you for supporting our journalism.

Market candy

Quiz time

With equities relatively pricy in the U.S., there's increasing attention on Europe as an investment location. The market on this side of the Atlantic looks a bit different. Let's test your knowledge: Which of these European sectors are the biggest gainers in 2021?

  • A. Autos
  • B. Banks
  • C. Tech
  • D. Energy

The answer is A, autos, led by the German giants of Daimler and Volkswagen. The Stoxx Europe 600 Automobiles & Parts is up 21% YTD. The 52-week change is even better, seeing a gain of 93% one that period.

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