In its latest outlook for 2025, Goldman Sachs is urging investors to “buy British” as undervalued UK stocks offer an attractive opportunity in Europe’s otherwise tepid equity market.
The bank highlights that UK shares, particularly those with a domestic focus, are trading at a discount compared to other European and US markets.
With a modestly better economic outlook for the UK, Goldman predicts a rebound driven by improving consumer sentiment and steady demand for services and financials.
The broader European market is expected to deliver only moderate gains, with the STOXX Europe 600 index forecast to rise about 6% over the next year.
Goldman attributes this limited growth to sluggish economic performance and geopolitical uncertainties, including the ongoing war in Ukraine. Corporate earnings are projected to grow by just 3% in 2025, a pace well below historical averages.
In contrast, UK stocks stand out due to their value and resilience. The US investment bank points to factors like lower exposure to US tariffs, thanks to a focus on services rather than manufacturing, and a favourable environment for private equity investment.
The strong performance of large-cap companies such as those in the FTSE 100 also serves as a potential hedge against volatility in US technology stocks, which have seen outsized growth in recent years.
The UK economy’s relative strength compared to the Eurozone is another reason for optimism.
While European economic growth remains sluggish, Goldman expects UK consumer spending to benefit from easing inflation and steady wage growth. This is likely to boost sectors such as retail, travel, and leisure, which rely on discretionary income.
Additionally, the Bank of England’s approach to monetary policy, including lower interest rates, is expected to further support market recovery.
Goldman remains cautious about broader European equities. While disinflation could lift valuations in some sectors, the bank sees limited upside for markets heavily reliant on manufacturing or export growth.
Instead, it highlights defensive stocks like telecommunications and real estate, which are less sensitive to economic cycles, as safer bets within Europe.
Mergers and acquisitions also feature prominently in Goldman’s 2025 strategy. The firm anticipates a resurgence in deal-making, with low interest rates and pent-up demand driving activity.
Sectors such as financial services and technology are expected to benefit most from this trend, offering additional opportunities for growth-oriented investors.