Schroders Downgrades FTSE Stocks to Neutral, Upgrades European Rivals

Schroders downgraded UK equities to neutral from positive, opting to express its financials and energy exposure through more targeted sector positions elsewhere, while simultaneously upgrading European stocks to positive on the strength of the banking sector.

The asset manager said that while financials, energy, and materials “remain supportive sectors” for the FTSE 100, it “now prefer more targeted expressions of these themes elsewhere.”

The shift reflects a broader portfolio rebalancing rather than an outright bearish call on UK stocks.

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In place of UK equities, Schroders upgraded Europe ex-UK to positive, citing “increased conviction in the financial sector.” The firm said attractive valuations, resilient earnings, and a higher-for-longer rate environment “continue to support European banks while providing diversification away from the narrow AI theme.”

The move comes as Schroders maintained its overall positive stance on global equities, supported by continued earnings momentum and AI-related infrastructure investment.

The firm has broadened equity exposure beyond technology through financials and resource-related sectors to improve diversification, noting the cycle is “becoming more mature and increasingly concentrated.”

On commodities, Schroders said its positive view is now expressed primarily through industrial metals and energy-related equities following profit-taking in agriculture and gold, another signal that the firm prefers equity vehicles over direct sector exposure in the current environment.

Schroders’s view on major risks is “unchanged relative to last month,” adding that it has “harvested some profits and await more provocative levels to take more significant action.”