UK equities

17 September 2026, 21:30 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 absolute backdrop with reasonable valuations Global Asset Class Preference Attractive (12.4x forward P/E versus median since 1990 of 12.8x) and solid earnings growth. We forecast profits rising 16% this year, but slowing FTSE 100 to 9% in 2027. 15 Sep 26 10,650 11,200 • Higher interest rates are a near-term risk, and can weigh on Dec 26 equity valuations; however, the improving economic backdrop in Jun 27 11,500 combination with high commodity exposure in the UK market means Source: Refinitiv, UBS that earnings can more than offset the effect of higher discount rates.

• We see attractive absolute returns for the UK market following the recent pullback, but we expect UK equities to lag other regions. Our base case assumes energy prices are contained and central bank rate hikes are short-lived, which should favor markets that benefit more from a renewed focus on the broader cyclical improvement or structural growth trends.

• This supports our preference for the Eurozone over the UK, and Source: UBS supports our Attractive ratings on European IT, industrials, banks, consumer discretionary, and health care. CIO themes • Absolute view: Attractive; Relative preference (in comparison to other European Leaders equity regions): Least Preferred. Europe's leading companies that we believe are positioned to benefit from global trends and the region’s structural shifts.

Central scenario Luxury & Lifestyles We see multi-trillion-dollar opportunities We see a supportive backdrop for UK equities. Valuations are reasonable emerging across Luxury & Lifestyles (12.4x forward P/E versus median since 1990 of 12.8x) and the earnings segments, underpinned by global population backdrop is improving, supported by strength in commodities and a growth, rapid urbanization, robust broader manufacturing- and investment-driven economic improvement. wealth creation, demographic shifts, and Higher interest rates are a near-term risk, and can weigh on equity accelerating digitalization. valuations; but what generally matters most for equities is why rates are rising. When tighter policy also reflects resilient economic activity, earnings Note: This month, we have updated our growth can more than offset the effect of higher discount rates. multi-asset asset class preference framework to bring together two useful perspectives. This is especially true for the UK market this cycle given the role of higher We continue to display absolute views energy prices in the shift in outlook for global central banks. This should (Attractive, Neutral, Unattractive), which provide support for UK equities given around 18% of MSCI UK's earnings show our expected absolute direction for this year are expected to come from the energy sector. Commodity strength a given asset. Now, we also display relative at the start of the year led us to upgrade our earnings forecast in August for preferences (Preferred, Neutral, or Least this year from 11% to 16%. With energy prices rising further since then, Preferred) to make it easier for investors to risks to our earnings estimate for this year are skewed to the upside, and see which assets we like more—or less— should support further gains for UK equities. We have therefore upgraded than the alternatives within their asset class the UK market's absolute outlook to Attractive after the recent pullback, or across asset classes. For more information, with earnings and valuations still supportive. please see the latest UBS House View Monthly Extended.

This report has been prepared by UBS Switzerland AG. Please see important disclaimers and disclosures that begin on page 4.

While we see supportive drivers, we expect UK equities to lag other regions. Our base case assumes that oil prices will ultimately be contained, and the rate hike cycle will be short-lived. In our view, this is unlikely to disrupt Preferences the improving broader earnings outlook which we expect to be more Banks supportive for other markets more exposed to improving manufacturing/…