FTSE Outlook Steady as Schroders Maintains Overweight Equities Despite Energy Shock

Schroders said it continues to favour equities even as global markets adjust to the inflationary effects of the Middle East conflict, offering a steady backdrop for investors in the FTSE and other major indices.

In its March multi-asset update, the firm said it “maintain[s] our positive view on equities,” noting that while volatility may stay elevated, “fundamentals remain supportive.”

Schroders entered the conflict overweight equities and commodities and underweight bonds, positioning for a benign cycle with inflation risks tied to fiscal stimulus and supply-chain restructuring.

The firm remains neutral on the UK stocks, saying there are “few clear catalysts for growth,” while political uncertainty continues to weigh on sentiment despite the potential resilience to AI disruption. Schroders also remains neutral on Europe (excluding the UK), saying that “despite a supportive fiscal backdrop, the market faces headwinds due to energy price sensitivity and large banking exposure.”

Schroders has now closed its overweight stance on international value stocks, citing vulnerability among financials, but said it still sees “upside to equities as we see low risk of recession.” To reduce risk, it has trimmed cyclicality and increased exposure to the U.S. dollar.

It has taken profit on commodities, arguing that after the oil price spike “the outlook is more balanced from here.” However, it added that this does not signal the end of volatility, as investors must assess how central banks respond to “this stagflationary shock.”

On regional equity preferences, Schroders remains positive on the United States, highlighting earnings growth and a resilient consumer. It upgraded emerging markets, particularly Asia, where technology-linked economies stand to benefit from tailwinds around artificial intelligence.