UK blue-chip shares could climb another 9% by the middle of next year, according to UBS, which raised its forecast for the FTSE 100 as stronger earnings growth offsets concerns over the economic outlook.
The Swiss bank expects the London benchmark to reach 11,000 by the end of 2026 and 11,300 by June 2027, up from around 10,255 at the last close.
UBS equity strategist Matthew Gilman said the UK market continues to benefit from “reasonable valuations” and improving profit growth, with the Footsie currently trading on 12.4 times forward earnings, slightly below its long-run average of 12.8 times since 1990.
The strategist forecasts earnings growth of 11% this year, driven largely by the index’s commodity heavyweights, followed by a further 10% increase in 2027 as stronger economic activity helps offset an expected decline in oil prices.
Despite the positive backdrop, UBS retains a ‘neutral’ rating on UK equities. It believes other markets offer better opportunities, particularly those with greater exposure to economic recovery or faster-growing sectors such as industrials and technology.
Gilman posited two scenarios, one optimistic and the other pessimistic.
In the optimistic scenario, where global growth is stronger, commodity prices higher, sterling is weaker and there is greater international investment into UK assets, the FTSE 100 is seen reaching 12,300 by June 2027.
The downside case, with weaker economic growth, lower commodity prices, higher bond yields, renewed trade tensions or a stronger poun, sees the index plunge to 7,700.
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