Goldman Sachs (NYSE: GS) forecasts a rise in the FTSE 100 to 7,900 this year, despite acknowledging certain “structural impediments.”
The firm notes that factors such as low valuation, a surge in global demand, limited supply boosting commodities stocks, and ongoing share buybacks are all favourable for the FTSE 100. Goldman Sachs expects the index to perform better than it did in 2023.
However, the investment bank also highlighted that the UK market is experiencing a trend of de-equitization. This trend is marked by companies repurchasing shares at unprecedented levels, a scarcity of Initial Public Offerings (IPOs), and a limited domestic interest in UK stocks.
Goldman Sachs attributes this trend partly to regulatory changes that have steered pension and insurance companies away from public equities. Additionally, it notes that UK households generally show a lower inclination towards stock ownership.
Furthermore, Goldman Sachs noted that the higher interest rates in fixed-rate savings options further diminish the likelihood of a significant shift towards household equity investments.
The firm also mentioned that pension funds and international investors increasingly gravitate towards bonds, attracted by their comparatively higher yields.
