UBS spots a 2026 turning point for UK and European stocks — and names Aviva, NatWest among top themesNEW YORK, December 29, 2025, 06:34 ET

29 December 2025

UBS expects Europe to return to earnings growth in 2026 and flagged a slate of London-listed names as potential beneficiaries. ^[1]
UK and European benchmarks are closing out a strong year, while investors focus on the 2026 rate outlook. ^[2]
A Seeking Alpha contributor said steady European Central Bank rates and political stability support a cautious case for Europe, with energy and real estate standing out. ^[3]

UBS has flagged 2026 as a potential turning point for UK and European equities, saying the region is set for a return to earnings growth after years of false starts. ^[4]

The call lands as investors look beyond thin year-end trading toward 2026, with markets focused on the path for interest rates and corporate profits. ^[5]

Britain’s FTSE 100 is up 20.7% so far this year, outpacing the pan-European STOXX 600’s 15.8% gain and the S&P 500’s 17.8% rise, Reuters data showed. ^[6]

UBS said much of the recent move in Europe reflected a valuation catch-up, but argued next year could bring a more durable shift as profits improve. ^[7]

The bank’s strategists estimate earnings per share, a common measure of profit per share, will rise about 7% on average for European stocks in 2026. ^[8]

That compares with broader analyst consensus expectations closer to 10-11%, UBS said, while adding that policy support, lower valuations and improving sentiment still bolster the case for the region. ^[9]

In the UK, UBS highlighted insurers as a standout sector and pointed to Aviva and Admiral in a screen it calls “REVS”, covering regime, earnings, valuation and sentiment. ^[10]

UBS said Aviva trades at about 11 times expected 2026 earnings — a price-to-earnings measure — and yields about 5.5%, while Admiral trades around 13 times and yields about 7.3%. ^[11]

It also cited M&G as a preferred name, saying it trades at about nine times next year’s earnings and yields roughly 7.5%. ^[12]

UBS added that European banks should continue to outperform U.S. peers, pointing to accelerating loan growth, cost control and strong capital positions. ^[13]

The bank also flagged NatWest and a group of UK companies — including RELX, Sage, Breedon and ITM Power — in a thematic screen called GOTCHA, aimed at identifying firms with structural tailwinds such as electrification, renewables and productivity gains. ^[14]

UBS said early artificial intelligence adoption is starting to lift efficiency in some industries and singled out data-heavy businesses such as RELX as potential beneficiaries of that trend. ^[15]

On the flip side, UBS said it was cautious on autos, chemicals and household products, and questioned whether Unilever’s margin targets look achievable as consumers become more price-sensitive. ^[16]

A separate Seeking Alpha analysis published on Sunday said political stability and steady ECB rates underpin a cautiously optimistic view on Europe in 2026, even as geopolitical risks remain material. ^[17]

The author, who writes under the name “The Investment Doctor,” forecast modest U.S. equity gains in 2026 with the S&P 500 ending near 7,110, and said European energy and real estate could offer attractive risk-reward as financing costs ease. Real estate investment trusts, or REITs, are listed vehicles that own or finance property and typically depend on debt markets. ^[18]

Central bank expectations remain a key backdrop for risk assets heading into the new year. “We’re not seeing runaway inflation risk as a base case so we’re still thinking the Fed has room to cut,” said Becky Qin, a multi-asset portfolio manager at Fidelity International. ^[19]

In a Dec. 23 post, Real Investment Advice said investors have treated ECB officials’ recent tone as a signal the bank is comfortable with the current rate level after about 2 percentage points of cuts over the past two years, and argued big policy gaps between the ECB and the Fed are rarely sustained because they can move currencies and capital flows. ^[20]

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