FTSE 100 outperformed S&P 500 this year. Is more upside ahead in 2026?
An AI bull run has driven stocks to new highs in America this year. But the country’s major indexes have been outperformed by U.K. stocks in 2025 so far. Political and economic uncertainty hasn’t stopped London’s benchmark FTSE 100 index from gaining more than 21.1% so far this year, ahead of the tech-heavy Nasdaq Composite ‘s 20.7%, the highest performing Wall Street average. The S & P 500 , meanwhile, trails behind with a 16.2% gain over the course of the year. In a Dec. 15 note, Russ Mould, investment director at AJ Bell, argued the FTSE 100 could hit fresh highs in 2026, after setting multiple record prices over the course of this year. The current record high of 9,930.09 points was set on Nov. 12. .FTSE YTD line FTSE 100 Mould said a mix of rising corporate profits, generous cash returns to shareholders and a smattering of M & A activity had propelled the FTSE 100 higher this year, helped by falling interest rates. “All other things being equal, the omens are currently quite good as analysts forecast 14% profit growth from the FTSE in 2026, and dividend growth and an ongoing share buyback bonanza have the potential to further boost total returns from UK equities,” he said. Mould noted that the index was a good play on both global growth and inflation, since it is packed by cyclicals, commodity plays and financials, with “a bedrock of yield support from utilities and consumer staples underneath.” “Best of all, analysts have started to increase their estimates for 2026 and 2027. This is a marked contrast to the pattern of much of the past few years and such momentum, if it continues, could help give further impetus to the FTSE 100, and the wider U.K. equity market in the coming twelve months,” he said. Chris Rush, Investment Manager at Kingswood Group’s IBOSS, told CNBC he also saw upside ahead for U.K. equities, but suggested they should comprise one part of a broader portfolio. “Despite strong performance this year, U.K. equities remain relatively unloved and attractively valued compared with their historic averages,” he said in an email. “Taken together, these factors suggest that the case for U.K. assets within a diversified portfolio remains intact as we head into the uncertainties of the year ahead.” While there is optimism toward the U.K. market, Mislav Matejka, head of global and European equity strategy at JP Morgan, argued British equities often do well because traders are “very bearish on everything else,” given that the FTSE 100 is a liquid, defensive quality market. The U.K. market is one of many indexes outside of Wall Street that benefited from a broad diversification away from the U.S. earlier this year. Those trades, which came in the wake of President Donald Trump’s so-called “liberation day” tariffs, have been labeled ” Sell America ,” ” Anywhere but the USA (ABUSA) ” and even the ” Trump Dump .” The rotation appears to have tapered off toward the end of the year, with some international markets’ outperformances narrowing and U.S. stocks hitting record highs . Speaking at a roundtable in London earlier this month, Matejka said that many of the international investors he’d spoken with more recently were “very uncomfortable” with British equities. “The concern is growth and taxes and politics,” he said. Looking ahead into 2026, Matejka painted a mixed picture for the U.K. market. “It’s still exceptionally cheap,” he added. “It makes sense to be constructive on the U.K., but I don’t have it as an overweight because there is no compelling angle – there is no clear growth acceleration.” Matejka, who was speaking before the Bank of England cut its key interest rate on Dec. 18, said one way investors could play U.K. stocks was to allocate to those that are sensitive to interest rates, given expectations of up to four more cuts in the coming year. Homebuilders and financial services firms’ shares edged higher in the wake of the Bank of England’s decision on Thursday. But Matejka argued the U.K. outlook did not have a “turn,” or a catalyst for growth, like rival markets such as Germany or China. “We think in absolute terms, [the FTSE 100] goes up 5% to 10% next year, because we think most of the markets will go up, but we are not overweight simply because we don’t have the underlying story,” he said.
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