Can the FTSE 250 Benefit From the Comeback in European and UK Growth Stocks?

Growth stocks in the UK and Europe are on the comeback trail in 2026 after several years in which value names dominated, Panmure Liberum’s Joachim Klement said in a recent note.

As a beneficiary of this shift toward mid-cap growth and domestic recovery, the FTSE 250 is showing signs of momentum. While the index has consolidated over the last few weeks, it is pushing to break higher after a strong start to the year.

Klement highlighted that the MSCI Europe Value Index outperformed the MSCI Europe Growth Index by 17 percentage points in 2025 and by more than 5 percentage points annually over the past three years. 

A similar pattern played out in the United Kingdom, where value stocks led by 11 percentage points.

But Klement argued that the dynamic may reverse as government bond yields decline. He highlighted that “a one percentage point move in government bond yields in the UK or Europe typically moves stock markets by close to ten per cent,” far outweighing the impact of changes in annual earnings expectations.

Lower yields, he said, disproportionately benefit growth stocks because a larger share of their profits lies further in the future. 

If 10-year UK gilt yields fall from 4.5 percent to 4 percent by the end of 2026, a scenario he views as plausible given easing inflation and expected Bank of England rate cuts, UK growth stocks could outperform value names by as much as five percentage points.

“Also, the Chancellor Rachel Reeves seems to have done enough in her budget last year to calm bond markets,” he added.

Across Europe, similar trends may unfold, though Klement warned that Germany’s fiscal expansion could limit declines in German Bunds, resulting in a smaller tilt back toward growth stocks compared with the UK.