Goldman Sachs (NYSE:GS) expects the FTSE 100 to rise to 7,900 this year despite what it termed “structural impediments”.
“Low valuation, improving global demand and low supply aiding commodities stocks, and continued buybacks all support FTSE 100,” it said, adding “we do not expect UKX to underperform as it did in 2023“.
But the investment bank pointed out the UK market has been de-equitising, companies are buying back shares in record amounts, there have been very few IPOs, “and coincident with this – and we argue the main driver – there are relatively few domestic buyers of UK stocks”.
Goldman explained regulation has pushed pension/insurance companies out of public equity and UK households have a relatively low propensity to own stock.
Net Buying of UK Equities (GBP billion)
Source: Haver Analytics, Goldman Sachs (NYSE:GS) (Goldman Sachs (NYSE:GS)) Global Investment Research
In addition, higher rates now on offer in fixed rate savings products make it even less likely that there will be a structural shift in equity by households, it said.
“Increasingly pension funds and overseas investors have been allocating more to bonds given the comparatively high yields to offer,” Goldman added.