Although performing strongly in early 2026, UBS maintains a neutral stance on the UK stock market

LootboxPhobia · 2026-02-27T10:57:29+00:00

UBS Group strategist Matthew Gilman stated that although the UK stock market performed strongly in early 2026, he maintains a neutral stance due to limited fundamental improvements. Earnings are expected to grow 5% in 2026 and 15% in 2027. The market shift is favorable for the UK, with a target set at 10,500 points. In an optimistic scenario, it could reach 11,300 points, while in a pessimistic scenario, it could drop to 7,200 points.

LootboxPhobia

2026-02-27 10:57:29

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Investing.com - UBS strategist Matthew Gilman stated in a report that although the UK stock market is expected to perform strongly in early 2026, the bank maintains a neutral stance on the UK stock market due to limited fundamentals improvement.

The UK stock market benefits from sector rotation, with capital flowing into capital-intensive companies, partly due to investor concerns over AI disruption. Given the market’s large exposure to commodities and defensive sectors, this shift is favorable for the UK market.

UBS expects earnings to grow about 5% in 2026 and 15% in 2027. The bank acknowledges that with recent rises in oil and copper prices, profit improvements may come earlier than expected, although faster growth in 2026 could lead to a slowdown in 2027.

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The MSCI UK Index is currently trading at a forward P/E of 14.2, a 15% premium over its 15-year average. UBS states that the expected earnings rebound seems largely reflected in current prices, with limited room for further gains.

UBS sets a neutral target of 10,500 points for the FTSE 100 index by December 2026, compared to its Monday close of 10,677. The bank also provides a target of 10,300 points for June 2026.

The investment bank remains optimistic about the banking, industrial, information technology, and real estate sectors, believing these sectors will benefit from long-term global trends, cyclical improvements, and supportive policies.

UBS’s “European Leaders” theme aims to capture opportunities among leading European companies expected to benefit from global trends and regional structural shifts, including UK firms.

In an optimistic scenario, UBS sets a target of 11,300 points for the FTSE 100 by December 2026, supported by factors such as improved global growth, rising commodity prices, a weaker pound, US investors diversifying into UK assets, and supportive policy measures.

The bank’s pessimistic scenario targets 7,200 points, with risks including a global recession, renewed US-Europe trade tensions, rising inflation leading to sustained high interest rates, falling commodity prices, or a strengthening pound dragging down overseas earnings.

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