Global banking giant Goldman Sachs is advising its clients to snap up a stake in British firms, taking a bullish stance on the future of UK stocks.
Buoyed by expectations of less Brexit uncertainty and blockbuster spending promises from both the major political parties, the US investment bank has recommended a long position on UK domestic stocks.
Since the Brexit referendum, UK domestic stocks have underperformed UK international stocks by 20 per cent.
However, in its 2020 outlook published today Goldman has urged its clients to take advantage of the cheaper domestic shares by buying them up ahead of an expected rebound in the economy following next month’s crunch election.
Goldman economists have upgraded their growth forecasts for the next three years, predicting a rise of 2.4 per cent in the second half of 2020.
For 2021 the bank is expecting growth of two per cent, up from 1.6 per cent, and in 2022 it has raised its forecasts from 1.8 per cent to 2.1 per cent, providing Brexit clarity and fiscal stimulus can be delivered.
Investor hopes of a bounce in UK stocks have been mounting as the 12 December election draws near, with the FTSE 250 hitting a 15-month high this week following steady recent gains.
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Yet expectations of a Brexit deal under a newly-formed Conservative government have been pinned back by differing polls which suggest a wide range of possible outcomes for the upcoming election.
While the pound rose sharply on Monday after one survey pointed to an 80-seat majority for the Conservatives, the latest poll showed a weaker lead for Johnson, causing sterling to fall back down by 0.3 per cent today.
Against the backdrop of its outlook for growth, Goldman expects the Bank of England to hike its interest rate by 25 basis points in late 2020, and then once per year in 2021 and 2022.
Goldman’s economists also expect a modest recovery in global growth in 2020, “driven by loose financial conditions and a robust consumer”.