Following a pivotal year in global politics, our latest webinar session examined opportunities in UK & European equities and the implications of shifting political dynamics for advisers and investment managers.
Graham Hook, Head of EMEA Government Relations & Public Policy, opened with a forward‑looking view of the UK political landscape. He outlined the instability of the current UK government leadership, the challenges facing potential successors, and how any change or continuity could influence tax, spending, and market sentiment in the months ahead.
Our panel explored how investors are navigating a complex mix of geopolitical tensions, political uncertainty and shifting macroeconomic forces. With perspectives spanning UK, European and global equities, the discussion focused on how portfolios are being positioned amid uncertainty, and where opportunities may still lie.
Here are the seven key takeaways from the session:
While geopolitical tensions remain elevated, particularly in the Middle East, the panel noted that markets appear more focused on plausible outcomes than extreme tail risks. This has created a more constructive backdrop for equities than during periods of peak anxiety earlier in the year.
Rather than assuming a smooth or rapid resolution, investors are increasingly factoring in ongoing uncertainty and positioning portfolios accordingly.
Domestic UK politics remain unsettled, with leadership questions and fiscal challenges firmly in focus. However, the panel agreed that markets are likely to be more sensitive to borrowing levels and fiscal credibility than to tax changes alone.
Following past episodes of market volatility driven by unfunded spending plans, any future government is expected to be cautious about large increases in borrowing as spending pressures continue to build.
Against this backdrop, UK equity portfolios have been adjusted to reduce exposure to more domestically sensitive areas, such as parts of consumer, property and housing sectors.
At the same time, managers highlighted the international nature of the UK market, using it to access global growth opportunities and diversify revenue sources beyond the domestic economy.
A major theme of the discussion was the significance of Germany’s move towards stronger fiscal support, particularly in defence, infrastructure and climate investment.
While implementation takes time, the panel emphasised that this marks a meaningful shift away from the post‑financial‑crisis reliance on monetary policy alone. Over time, this could improve the growth and demand outlook for parts of the European equity market.
Higher energy prices remain a challenge, but the panel argued that the current environment is very different from the energy shock following the invasion of Ukraine. Greater energy diversification, increased nuclear availability, and investment in renewables have reduced Europe’s vulnerability.
Within portfolios, energy exposure has been selectively increased – both in response to fundamentals and as a form of diversification in an uncertain environment.
Rather than focusing only on high‑profile technology names, the discussion highlighted companies using AI to enhance existing products, improve efficiency and deepen customer engagement.
In some cases, share price weakness has created opportunities where business fundamentals appear stronger than market perceptions suggest, particularly where growth and margins are improving despite recent volatility.
Across both UK and European strategies, the panel stressed the importance of valuation discipline and investing in companies undergoing positive change. The aim is not to chase fashionable themes, but to identify businesses where we believe returns can improve over time and where this improvement is not yet fully reflected in valuations.
Volatility, while uncomfortable, was consistently framed as a source of opportunity for long‑term, research‑driven investors.
Click to watch the full recording (registration required).
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