AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
Highlights:
- UK stocks trading at a discount: Goldman Sachs identifies UK equities, particularly domestically focused ones, as undervalued compared to European and US counterparts.
- Improving economic outlook in the UK: Factors like easing inflation and steady wage growth are seen as catalysts for consumer-driven sectors.
- Broader European markets face challenges: Limited growth in the Eurozone due to geopolitical tensions and sluggish corporate earnings keeps expectations tempered.
In its 2025 market outlook, Goldman Sachs has singled out UK equities as a compelling opportunity within Europe’s generally subdued equity landscape. With UK shares trading at a discount relative to both European and US markets, the bank suggests that improving domestic conditions and resilient corporate structures could fuel a recovery.
UK Equities: Value and Resilience
Goldman highlights the appeal of UK stocks, especially those with a domestic focus, citing their relative undervaluation and structural strengths. The FTSE 100’s performance, characterized by large-cap companies with diversified global exposure, offers a potential hedge against volatility in the high-growth US tech sector. Additionally, the UK’s service-heavy economy, which is less reliant on manufacturing and thus less exposed to global tariffs, is seen as a key advantage.
Private equity activity in the UK also adds to the optimism, with a favourable investment environment making the region attractive for strategic acquisitions.
Domestic Drivers for Growth
The UK’s modestly improving economic outlook is central to Goldman’s thesis. Easing inflation, coupled with steady wage growth, is expected to bolster consumer spending, benefiting discretionary sectors such as retail, travel, and leisure. The Bank of England’s accommodative monetary policy, characterized by lower interest rates, further supports the recovery narrative.
Goldman also notes that the UK economy is likely to outperform the Eurozone, where growth remains sluggish. This divergence strengthens the case for UK equities as a standout within Europe.
European Markets: Moderate Gains Amid Challenges
In contrast, Goldman’s outlook for broader European markets is restrained. The STOXX Europe 600 index is forecast to deliver just a 6% gain over the next year, hindered by geopolitical uncertainties like the war in Ukraine and lacklustre economic performance. Corporate earnings growth, projected at 3% for 2025, remains below historical averages.
Defensive sectors such as telecommunications and real estate are highlighted as relatively safer bets in the European context, offering stability in a challenging environment.
Merger and Acquisition Trends
Goldman anticipates a resurgence in mergers and acquisitions, driven by low interest rates and pent-up demand. Financial services and technology sectors are expected to lead the way, providing additional growth avenues within Europe.
As 2025 approaches, Goldman’s strategic emphasis on UK equities reflects a belief in their value potential and resilience, positioning the region as a bright spot in an otherwise cautious European market outlook.
