UK equities

20 August 2026, 21:00 UTC Chief Investment Office GWM Investment Research

UK equities CIO View: UK equities Matthew Gilman, Head, CIO Europe Equity Strategy, UBS Switzerland AG

• We see a supportive backdrop with reasonable valuations (12.7x Global Asset Class Preference Neutral forward P/E versus median since 1990 of 12.8x) and strong earnings. Given the profit strength in the first half, driven by high commodity FTSE 100 prices and an improving cyclical outlook, we raise our earnings 12 Aug 26 10,825 growth forecast for this year to 16% (from 11%), and expect growth Dec 26 11,200 to remain robust in 2027 at around 9% with an improving growth 11,500 Jun 27 backdrop offset by weaker growth in commodities. Source: Refinitiv, UBS • While we see UK equities as well supported, we rate the region as Neutral, as we favor markets that are either more cyclical in the event of a quick resolution to energy flows or have higher structural growth exposure than the UK.

• Our preferences within the region seek to capture a combination of structural growth and beneficiaries of an improving cyclical backdrop and broadening equity returns. We have upgraded European IT back to Attractive, and continue to like exposure to the banks, industrials, Source: UBS consumer discretionary, and health care sectors. CIO themes European Leaders Central scenario Europe's leading companies that we believe are positioned to benefit from global trends We see a supportive backdrop for UK equities. Valuations are reasonable and the region’s structural shifts. (12.7x forward P/E versus median since 1990 of 12.8x), global policy is broadly neutral, and the earnings backdrop improving. Commodity Luxury & Lifestyles strength at the start of the year and improving earnings breadth visible in We see multi-trillion-dollar opportunities 2Q results lead us to upgrade our earnings growth forecast for this year emerging across Luxury & Lifestyles from 11% to 16%. We continue to see growth remaining robust next segments, underpinned by global population year, but given the likely drag from commodities against this year's tough growth, rapid urbanization, robust comparables, we expect earnings growth to slow to 9%. wealth creation, demographic shifts, and accelerating digitalization. This solid earnings backdrop should continue to support UK equities, but we see a brighter outlook for other regions that are either more cyclically geared into a manufacturing recovery or have higher exposure to key secular themes such as AI or electrification. This does not mean that the UK Preferences offers no secular growth opportunities, but rather that these opportunities Banks are better accessed via single-stock selections within the UK market. This Consumer discretionary also explains the very narrow market leadership of the UK over the past Health care 12-18 months. Industrials Information technology Our preferences within the region seek to capture a combination of structural growth and beneficiaries of an improving cyclical backdrop and broadening equity returns. At a sector level, we favor banks, industrials, consumer discretionary, health care, and—following improved valuations and renewed earnings momentum—European information technology, which we upgrade back to Attractive (after a downgrade to Neutral in early

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June). These sectors offer a combination of cyclical and structural growth, and our “European leaders" theme also identifies specific companies exposed to the key global thematic drivers that Europe’s leading companies can benefit from.

Upside scenario FTSE 100 June 2027 target: 12,300

• Global growth improves more rapidly, supported by easy financial conditions and improving consumer and business confidence.

• Higher commodity prices (if demand driven) would lift UK equities in particular, given their high commodity exposure.

• Weaker sterling. With 75-80% of FTSE 100 revenues generated outside the UK, a weaker GBP could support higher local currency returns, all else being equal.

• US investors diversify into UK assets, helping to close the UK's…