European markets are looking positive in 2026, with reduced recession fears and stable inflation. Growth is expected at 1.4% in 2026 and 1.5% in 2027, driven by private consumption and investment. Fiscal policies and domestic demand are key growth drivers. European equities are supported by improving macroeconomic conditions, reduced uncertainty, and visible fiscal support.

European equities are trading close to fair value, capturing positive news. However, valuations are high, leaving less incentive to buy now. The euro faces challenges against the dollar, impacting exporters. Despite being moderately undervalued, future movements will be influenced by macro and policy dynamics.

Energy markets are transitioning from crisis to long-term transformation post-Ukraine war. Natural gas prices have fallen, with ample supply securing demand. The EU’s decision to phase out Russian gas imports by 2027 makes US LNG a key import source. Power supply is sufficient with growing demand, influenced by AI needs. Power prices are expected to decline, with varying rates across European countries.

Read more at Morningstar: 5 Charts Every Investor Should Watch in Europe in 2026