NEW YORK, January 1, 2026, 15:07 ET
- The FTSE 100 ended 2025 up more than 21%, its strongest annual performance since 2009, and finished the year just off record levels.
- Investors credited the rally to bets on further Bank of England rate cuts, strength in banks and miners, and the market’s relatively cheap valuations versus peers.
- Strategists say 2026 will test whether that “value” bid holds as global volatility and policy headlines keep investors rotating across regions. Reuters
Britain’s FTSE 100 heads into 2026 near a record after posting its strongest annual gain in 16 years, raising the stakes for London stocks in the year ahead. The blue-chip index slipped 0.2% on the final session of 2025, a day after closing at an all-time high.
The timing matters because investors are resetting positions at the start of the year after a sharp run-up in UK equities. London markets were closed on Thursday for the New Year holiday following an early close on Wednesday.
The 2026 outlook hinges on whether the forces that drove the rally in 2025 — rate-cut expectations and a hunt for cheaper markets — continue to outweigh volatility tied to global politics and growth. The FTSE 100 has been pitched as a “diversifier,” meaning its sector mix can behave differently from tech-heavy U.S. benchmarks during big swings in sentiment. Reuters
The FTSE 100 rose more than 21% in 2025, marking a fifth straight year of gains and its strongest performance since 2009. By comparison, the pan-European STOXX 600 gained 16.6% and the U.S. S&P 500 climbed 17.2%.
In thin year-end trading, the FTSE 100 finished at a record 9,940.7 points on Dec. 30, then eased in the shortened Dec. 31 session. Reuters reported holiday-period volumes on London exchanges were far below the 20-day average.
Rate expectations sit at the centre of the 2026 forecast. The Bank of England cut interest rates by 25 basis points — one basis point is 0.01 percentage point — in December for a fourth time in 2025, but signalled the already gradual pace of easing may slow.
The rally left the market’s big sectors in focus. The resources-heavy FTSE 100 drew support from miners including Fresnillo and Antofagasta, which advanced as gold, silver and copper prices rose over the year.
Banks also helped drive index gains into year-end, with HSBC, Barclays and Lloyds among the lenders that firmed in the penultimate session of 2025. Investors have linked the sector’s strength to the prospect of lower borrowing costs and resilient earnings.
Not every heavyweight participated. Bunzl and Diageo fell around 37% each over 2025, leaving the business supplies distributor and the spirits maker among the index’s biggest laggards.
Mid-caps tell a more domestic story for 2026. The FTSE 250 — a gauge of more UK-focused companies — gained 9% in 2025 but ended nearly 8% below its 2021 peak, while the FTSE Small Cap index rose about 10% and finished 1.5% short of its 2021 high.
Some strategists argue the UK’s appeal is part of a broader European rotation that could extend into early 2026. “This European market renewal should continue into early 2026, though volatility will persist,” said Danni Hewson, head of financial analysis at AJ Bell. Reuters
That volatility risk is also a key check on the UK stock market forecast for 2026. Reuters has reported investors have broadened bets beyond the United States amid White House trade uncertainty and uneven economic signals, a backdrop that can quickly reshape flows into London’s globally exposed names.
For the FTSE 100, investors will watch whether further Bank of England easing materialises and whether commodity-linked earnings stay supportive after a year in which miners and banks did much of the lifting. After a 16-year-best annual run, the market enters 2026 with less room for disappointment.
