Down 20%! Has a stock market dip created a value opportunity in this UK growth share?

After a sharp dip at the end of last week, the UK stock market is stabilising. The UK’s flagship index, the FTSE 100, slipped to 9,698 points on 14 November after falling around 3% throughout the week.

Earlier in the week, it had climbed to record levels near 10,000 points. So what’s really going on with the stock market right now? And more importantly, where might it head in 2026?

What experts are saying about a potential crash

Goldman Sachs CEO David Solomon recently suggested that investors shouldn’t be surprised if there’s a market pullback within the next 12-24 months. JP Morgan‘s Jamie Dimon has echoed similar concerns, pointing to high valuations, geopolitical uncertainty and government spending as key risks.

But that doesn’t guarantee a crash. If inflation cools and interest rates keep falling, corporate earnings could catch up with valuations, potentially deflating bubble concerns without a dramatic correction.

The reality is that timing the market is incredibly difficult, even for the pros.

Factors affecting the UK market

All eyes are now on Chancellor Rachel Reeves and what she’ll announce on 26 November in her Autumn Budget. Analysts are expecting the government to fill a fiscal gap estimated at between £30bn and £40bn, with the burden likely falling on a mix of tax rises and spending adjustments.​

Reports suggest income tax and corporation tax won’t change, but other taxes could rise. Some experts have also suggested the possibility of changes to income tax thresholds or National Insurance contributions.​

For the stock market, the big question is how these measures will affect consumer spending and business confidence. Retail, hospitality and property sectors could be particularly vulnerable if household budgets get squeezed further.

Lower interest rates are another factor that could boost the economy. This month, the Bank of England voted to hold the interest rate at 4%, but markets are now pricing in a 60%-65% chance of a rate cut in December.

How UK stocks have reacted

UK banks haven’t had the easiest week, with Barclays, HSBC and Standard Chartered dipping earlier this week. Meanwhile, advertising giant WPP saw its shares jump 5% after reports emerged that it had attracted takeover interest from French rival Havas and private equity firms Apollo and KKR. 

One of the FTSE 100’s most interesting stories has been 3i Group (LSE: III). The private equity giant saw its share price tumble by around 20% in just five days following its latest results.​

On the surface, the numbers looked strong. Revenue and earnings were up 62% and 49% respectively year-on-year, and the company declared an interim dividend of 36.5p per share, up from 30.5p last year. So why the sell-off?​

The answer lies in CEO Simon Borrows’ cautious comments about the challenging environment ahead. Specifically, he voiced concerns about weak results in France from the group’s key holding, Action, the Dutch discount retailer that makes up nearly 70% of 3i’s £29bn portfolio. 

Final thoughts

I think 3i Group now looks attractively undervalued, trading at around 5.2 times earnings. There are still notable risks, as Action’s sales growth could fall short of the 6.1% target previously outlined.​

That could lead to further losses in the short term. But since the company’s long-term outlook still looks solid, I think it’s an opportunity worth considering.

The post Down 20%! Has a stock market dip created a value opportunity in this UK growth share? appeared first on The Motley Fool UK.

More reading

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• 3i Group shares plunge 15% on today’s results – is this the ultimate FTSE 100 buying opportunity?
• This world-class UK share has smashed the FTSE 100 over 5 years and for once I’m not talking about Rolls-Royce

HSBC Holdings is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Mark Hartley has positions in 3i Group Plc and HSBC Holdings. The Motley Fool UK has recommended Barclays Plc, HSBC Holdings, and Standard Chartered Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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