Investing.com — UBS raised its UK earnings growth forecast for 2026 to 16% from 11%, with no consensus average or range provided in the source, as profit strength in the first half was driven by high commodity prices and an improving cyclical outlook.
The broker expects earnings growth to remain robust in 2027 at around 9%, although weaker commodity growth is expected to offset an improving broader growth backdrop.
UBS said UK equities had a supportive backdrop, with the trading at 12.7 times forward earnings, compared with a median of 12.8 times since 1990. It said improving earnings breadth in second-quarter results had contributed to the upgrade in its 2026 forecast.
UBS nevertheless maintained a “neutral” rating on UK equities, saying it preferred markets with greater cyclical exposure to a manufacturing recovery or higher exposure to structural themes such as artificial intelligence and electrification.
Within the UK market, UBS favoured banks, industrials, consumer discretionary and health care. It also upgraded European information technology to Attractive following improved valuations and renewed earnings momentum.
UBS set a June 2027 central-scenario target of 11,500 for the FTSE 100, compared with 10,825 on Aug. 12. Its upside scenario target was 12,300, while its downside scenario target was 7,700.
The broker said higher commodity prices, weaker sterling and policy support could benefit UK equities in its upside scenario. Its downside scenario included economic weakness, lower commodity prices and sharply higher bond yields.