BofA European Fund Manager Survey: Goldilocks regime drives a risk-on rotation (Highlights)

14 July 2026 Goldilocks emerges, but geopolitics needs to align A net 37% of European investors expect a Goldilocks environment of robust growth and fading inflation over the next three months, making it dominant regime view for the first time since Oct '24.

Growth expectations for Europe have improved sharply, with 54% expecting a stronger European economy over the coming twelve months, up from 11% last month.

Fiscal expansion has once again become the majority view why growth in Europe should accelerate, while geopolitical de-escalation hopes have faded.

Middle East instability remains the dominant geopolitical concern (43%), and energy prices and Inflation are considered both the biggest upside risk to global growth (if they decline) and downside risk (if they rise) by a wide margin.

A hawkish central-bank response to an upside inflation surprise (31%) is the most likely catalyst for a market correction.

European investors are bullish, global investors re-engage A net 54% of European investors expect European equities to rise over the next few months, up from a net 4% expecting declines in June.

A net 91% see upside over the coming twelve months, up from 71% last month, with the survey-implied expected return up to 6.3%, from 5.2% previously.

Global investors have turned marginally positive on Europe in a global allocation context (a net 2% reported to be OW versus -15% last month) but stay away from the UK (a net 37% are underweight, the highest since Aug '20).

Volume growth remains the key earnings driver Volume growth remains the main earnings driver (46%), while earnings upgrades remain the key expected catalyst for further equity gains, cited by 63% of investors.

Meanwhile, 46% see AI primarily supporting equities through margin expansion and cost savings.

Investors expect 12-month forward European EPS to rise by 5.6% over the next year (vs 6.0% last month).

Risk appetite improves, with cyclicals & financials in focus A net 26% project upside for European cyclicals versus defensives over the coming months, compared with a net 21% last month that expected downside.

Banks are the largest consensus overweight (+49%, the highest since Feb '22, the largest monthly increase across sectors), while autos remain the largest underweight (-46%).

Healthcare saw the largest monthly decline (+3 from +50), while insurance moved from UW to OW and industrials and energy moved from OW to UW.

The Euro periphery is the most preferred region in Europe (+29%), Germany remains the preferred market (+23%), and France the most disliked one (-37%).

Style preferences favour high momentum (+29%) and large caps (+9%), while investors turned positive on high beta and cut conviction in high quality to the lowest since Oct '21.

Paulina Strzelinska Quant Strategist MLI (UK) Sebastian Raedler Investment Strategist MLI (UK)