Weekly Equities Outlook: UK Budget & sectors to watch

The UK market has been focused on little else other than the Budget since September, with leaks, rumours, and uncertainty driving sentiment in the lead-up to Chancellor Rachel Reeves’ unveiling on November 26. 

The Chancellor faces a significant funding gap of around £30 billion amid elevated spending, slower-than-expected growth, and a productivity downgrade. While there has been speculation that Reeve would increase income tax, the latest reports suggest that Reeve won’t go back on election pledges not to raise one of the three main taxes. As a result, the Chancellor will need to do a fair bit of tinkering around the edges, against an economically challenging backdrop. The question is whether this will be enough to calm the bond market.

The board market will be quick to pass judgment over whether the government has done enough to put the country’s debt on a sustainable path. Any sense that the market isn’t on board with Reeve’s plan could spike bond yields, which is bad news for the market, especially the more domestically focused FTSE 250. Any weakness in the pound owing to a lack of credibility over the fiscal outlook could benefit the multinationals, which make up around 80% of the FTSE 100. Meanwhile, a sense that taxes are rising and that life will be harder could weigh on discretionary stocks. 

 Sectors to watch:

Banks in the firing line

The banking sector could be in the firing line, with Rachel Reeves considering a last-minute raid on banking profits. Banks have enjoyed a boost to profits thanks to interest rate cuts. Such news could send the sector, which has outperformed the broader index, lower in a knee-jerk reaction. Over the longer term, these charges would likely be passed on to the customer through higher fees and mortgage costs.  Watch: Lloyds, Barclays, NatWest.

How to trade LLOY around the budget?

Lloyds' share price ran into resistance at 95.75, its highest level since 2009, before easing lower to test the 50 SMA at 86.20. The price trades above the rising trendline support, with the uptrend still in play. Buyers will look to rise above 91.85, last week’s high, to extend gains back up towards 95.80.

A break below the 50 SMA and the rising trendline at 85.20 could open the door to the October low of 81.80. Below here, the September low of 77.35 comes into play.

Hospitality & - a rising national living wage

The National Living Wage is expected to increase by 4% an hour from April 2026, although this is a smaller increase than in recent years. This is bad news for the hospitality sector and retailers, which are already struggling to balance costs in some instances. It's fair to say no one is opposed to the principle of a higher national living wage; it has increased significantly in recent years. Without pro-business measures, the hospitality sector, in particular, could struggle, leading to job losses and business closures. Watch Whitbread, JD Wetherspoons.

How to trade WTB around the Budget?

After running into resistance at 3260, the price rebounded lower, breaking below the 50 and 200 SMA. The price has found support for now at 2675, the June low. Sellers will look to break below this level to extend the bearish trend towards 2550.

Any recovery would need to rise above the 200 SMA at 2820. A rise above 2900 creates a higher high, exposing 3000.

 Housebuilders for a hammering?

Chancellor Rachel Reeves is reportedly planning a new property tax. Fears that Reeves will target expensive, higher-value homes with a possible council tax surcharge for properties in the highest three bands of property value have reportedly slowed demand for more expensive properties. People may be allowed to defer paying the tax until they move house or when they pass away. Should the Chancellor scrap stamp duty at the same time, this could encourage movement in the housing market. However, if stamp duty remains, then this could add more brakes to an already slowing market, which could pull house builders lower.

Other potential changes include imposing a capital gains tax on the sale of a primary property if it sells for more than a set amount. Currently, primary residences are exempt from capital gains tax, so this would be a significant policy change and could also put the brakes on the housing market and pull housebuilders lower.

How to trade Taylor Wimpey around the Budget?

TW share price has been trending lower since May, trading below its falling trendline. The price recovered from the 88 low before running into resistance at 110, then rebounded lower, back below the 200 SMA to 97 support.

Sellers would need to take out 97p support to open the door to 87p. A break below here creates a lower low.

Buyers could be encouraged by the RSI's rebound. Buyers need to rise above the 50 SMA and the 200 SMA at 104 to stage a recovery towards 110. A rise above here creates a lower low.