"While interest rates are unlikely to remain at current historic lows forever, it is reasonably likely that interest rates over the next five years will, on average, remain low compared to the last couple of decades," the bank said.
Citigroup raised its end-2015 Stoxx 600 target to 450 from 400 and introduced and end-2016 target of 550, as a "grey-sky" scenario, compared with the index's close around 393 Monday. Its "blue-sky" scenario is for an around 70 percent upside by end-2016, or a target around 670, using higher growth and rating assumptions.
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For its grey-sky scenario, Citigroup expects 10-25 percent cumulative dividend growth, market payout ratios rising back toward their average levels and a dividend yield rerating to around 2.25-3 percent from around 3.1 percent currently.
Citigroup isn't alone in expecting the sun to shine on Europe.
"The euro is on its way lower, but European asset prices are on their way higher," Julius Baer said in a note last week. "Better-than-expected profits and increased capex plans from Carrefour, Aviva and Friends Life are tangible evidence that the European economy really did bottom late last year and is now recovering. That coupled with the ECB buying 60 billion euros a month in public sector securities starting next month until September next year, provide a decent tailwind for the region."
Stocks already rising
To be sure, Europe's stocks have already risen quite a bit -- with the Stoxx 600 index up nearly 15 percent so far this year amid strong inflows. Around $35.1 billion has flowed into developed Europe equity mutual funds and exchange-traded funds (ETFs) so far this year, according to data from Jefferies.