Investors in European markets remain unfazed by recent geopolitical events, leading to record highs in stock markets. However, with markets nearing fair value, caution is advised against future selloffs. Small-cap stocks and sectors like consumer defensive and healthcare present potential opportunities for investors. European stocks are currently fairly valued, offering neither cheap nor expensive valuations. While markets are not overvalued, the margin of safety has diminished, leaving investors vulnerable to potential downturns. Small-cap stocks, still trading at a discount, indicate bullish investor sentiment and economic optimism. Consumer defensive and healthcare stocks appear attractive with positive momentum and potential for valuation growth. Despite the volatility in markets, these sectors present opportunities for investors to capitalize on discounted stocks and industry growth.

Read more at Morningstar: What’s the Outlook for European Stock Markets in 2026?