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The FTSE 100‘s near an all-time high and the stock market’s red hot in places. This performance however, has very little to do with any policy support from the UK government.
UK stocks have largely benefitted from the movement of capital out of bonds, debt and savings as interest rates have fallen, and because some companies have consistently outperformed during the period.
In fact, a closer look at many companies in the UK shows that last year’s Budget, coupled with a misfiring economy, led to consistent downgrades of expected earnings.
Jet2, one of my favourite stocks, is a great example of this. Projected earnings for 2026 and 2027 have been greatly reduced in part due to later booking patterns, but also because of last year’s Budget. This was forecasted to add £25m in employment costs and £20m in sustainable fuel costs.
What’s in store this November?
Chancellor Rachel Reeves will deliver the Autumn Budget on 26 November. Speculation’s rife and it’s rumoured that the Budget will include stricter inheritance tax, higher capital gains tax, council tax reforms, and potential limits on tax-free pension lump sums.
This is driven by a £21bn-£30bn fiscal gap and weak growth.
FTSE stocks sensitive to UK consumption may come under pressure if household taxes rise. Meanwhile, capital flight risks rise if investor tax relief’s cut. Conversely, relief for business investment or ISA expansion could benefit select sectors.
Whatever happens, market volatility’s likely as investors shift to international, defensive or government-aligned assets to manage intensified fiscal uncertainty.
There’s also talk of higher taxes on UK banks, which I think would be incredibly disappointing. After all, following a decade of underperformance, they’re finally back on their feet.
As the Budget’s likely to target the wealthiest and most successful parts of the economy, there’s definitely scope for an outsized impact on stocks. However, a meltdown’s unlikely unless a big surprise takes place.
One to watch
There are plenty of rumours, including that Reeves could cut the tax-free limit on cash individual savings accounts (Cash ISAs). In turn, hypothetically, this could push capital into equities (stocks) even if the rest of the Budget appears to negatively impact UK companies.
With that in mind, investors may want to keep an eye on AJ Bell (LSE:AJB). The investment platform stock’s richly valued, but there’s a reason for this. It currently trades at 21.1 times forward earnings and 20.2 times forecasted earnings for 2026.
This valuation largely reflects its growth trajectory in recent years, which has largely tapered off in recent years — as well as the company’s strong operating margins of around 39%.
It’s also a decent dividend payer with a forward yield around 2.6%.
Why’s this one to watch? Well, as the UK’s largest listed brokerage — a popular choice for Stocks and Shares ISAs — it’s worth hypothesising that there could be some inflows as people move money out of Cash ISAs into well-regarded investment platforms.
But as I’ve suggested, it’s all very nuanced. There are potentially lots of moving parts.
The risk here’s the valuation. It’s expensive. Far pricier than Hargreaves Lansdown was before it was taken private. And because of that, I simply believe it’s one to watch rather than consider buying.
