Despite domestic headwinds, global investment manager, Ninety One, believes that UK equities stand out for investors seeking diversification away from the US.

After UK equities delivered a strong performance in 2025, Ninety One thinks that this trend will continue in 2026, trading at a substantial discount to other major markets. The firm believes that they offer investors a compelling alternative to increasingly concentrated US equity markets.

The FTSE 100 surpassed the 9,000 mark for the first time since its launch in 1984, with financials, healthcare and defence stocks leading the advance, supported in part by increased NATO spending commitments. “2025 highlighted the enduring relevance of the UK market and reminded investors of the important role it can play within diversified portfolios,” Ben Needham, UK quality portfolio manager, said in a note.

The firm believes that the renewed interest in the UK was driven by the resurgence of the value investment style, where returns over the past five years have been particularly strong, surpassing those of the S&P 500. Although value, growth and high-dividend stocks all performed well during the year, quality equities experienced a de-rating and are now trading below their 10-year median valuation, the firm continued.

After more than a decade in which high-quality, franchise businesses benefited from low interest rates and expanding multiples, the environment has shifted materially since 2022. Over the past three years, cyclical companies have re-rated sharply, while quality stocks have seen valuations compress. “Free-cash-flow valuations for UK quality stocks and the broader benchmark are virtually at parity. This reset has renewed interest in quality companies, particularly those with resilient business models and predictable revenues,” Needham continued. “Moreover, this gives us increased confidence in the outlook for quality as a style, focusing on those companies with top-line rigidity driven by high retention ratios, high recurring revenue streams and/or staple-like products.”

Recent company visits across the UK have shown the competitive strength of many businesses, particularly industrials with dominant market positions and strong balance sheets, the firm said.

Value strength supported by attractive valuations
Despite domestic headwinds, the firm believes that the UK stands out for investors seeking diversification away from the US. “The UK remains an attractive place to invest for those seeking an alternative to the concentrated US trade with its mix of well-run domestic businesses and global champions, both of which are trading at relatively low valuations,” Alessandro Dicorrado, value portfolio manager, said. “Even after a strong year, UK equities trade at a substantial discount to other major markets, even comparing sectors like-for-like.”

While the US market continues to look expensive, the UK offers a broad and diverse opportunity set for bottom-up investors. “We do not construct our portfolios based on any reliance on macro scenarios or mean reversion playing out; instead, we look for the best UK and international ideas on a bottom-up basis that meet our return criteria,” he added.

Dicorrado is not alone in his views. UK Rathbones Asset Management recently highlighted that UK stocks remain attractively valued in 2026, inflation and interest rates are easing, and overseas money is returning as questions grow over US valuations and a potential artificial intelligence bubble. Nevertheless, Rathbones is also positive on US equities, going into 2026. Geneva-headquartered Swiss private bank Union Bancaire Privée has also retained an overweight position in US equities in 2026, while a number of wealth managers believe that emerging markets will continue to outperform in 2026. Grégory Steiner at Paris-based Indosuez Wealth Management is constructive on equities in 2026, particularly US and emerging market equities. See more here and here.