London’s blue chip FTSE 100 Index crossed the 10,000-point symbolic mark for the very first time last Friday. This extended a strong rally of UK equities which gathered momentum through 2025, and carried over into the New Year.
The index was down below 10,000 at 10:50am, trading for 9,971.23.
Over the last 12 months the index rose by almost 21%, one of the best performances it has had since 2009. It also outperformed the S&P 500 which only gained a little under 17%.
The FTSE 100 is a performance index of 100 companies that are listed at the London Stock Exchange. It offers a high exposure for banks, mining, energy and defense firms.
Source AJ Bell
Banks, mining companies and defence companies lead the gains
The index has been boosted by the rise in metal prices, which is a major factor for mining stocks.
Antofagasta Rio Tinto Endeavour Mining all benefitted from a strong commodities market.
Fresnillo’s shares rose by about 450% in 2025 due to record prices for gold and silver.
Stocks of defence also played an important role.
BAE Systems and Babcock saw their order books grow and profits increase as NATO members in Western Europe committed to increased defence spending.
The banks also delivered good returns, with a resilient credit rating and low interest rates.
Lloyds, Barclays HSBC, Standard Chartered and Barclays all saw their share prices rise as margins and defaults were lower than expected.
The fastest climb between landmarks
According to investment platform AJ Bell the move from 1,000 to 10,000 is the fastest rise ever between milestones of 1,000 points for the FTSE 100.
After first reaching the 9,000 point mark in July 2025, the benchmark index achieved the milestone of five-digits in only 171 days.
Dan Coatsworth is the head of markets for AJ Bell. He said that the fastest leap in 1,000-blocks was when the FTSE 100 rose from 5,000 up to 6,000 in late 1990s, which took only 229 days.
The longest time between 6,000 and 7,000 was 6,206. He said that the period was marked by a financial crisis around the world.
Stocks are supported by profits, rate reductions and buybacks
The UK equity market has outperformed the rest of Europe, according to analysts.
The corporate profits of companies are improving, and they have increased the amount of money returned to their shareholders.
Bank of England interest rate cuts have provided additional support even though the yields on government bonds have been stubbornly high.
In a recent note, Russ Mould of AJ Bell Investment Director said that “lower interest rates by the Bank of England could have also helped” even though benchmark yields on government bonds haven’t quite followed the script. The 10-year gilt rate has barely dropped even when the Monetary Policy Committee cut its base rate.
Sue Noffke is the head of UK equity at Schroders. She has described what she calls corporate improvement, where companies are tightening up capital allocations and relying heavily on stock buybacks.
Noffke, in remarks cited late last year by The Guardian, said that “there is a list of companies which can be seen getting stricter with their capital allocation to pursue better returns and are being prodded” by shareholders.
She believes that in the UK, 55% of the large listed companies bought at least 1% back of their stock over the last year. In the US this figure is closer to 40%.
Shell has alone repurchased over 20% of its shares since 2020.
She argues that the UK stock exchange has moved away from being known as the capital of dividend yields in the world.
It’s attractive for dividend income but not as outstanding. “It has become the global capital for share buybacks.”
Investors prefer UK over US in volatile times
The FTSE 100 will also perform better than US equities by 2025, as global investors become wary about the high valuations of American technology companies.
Coatsworth stated that uncertainty is encouraging investors to seek out cheaper markets outside of the US.
He says that foreign investors have increased their interest in diversifying their portfolios. The FTSE 100 also shined during turbulent periods due to the plethora defensive companies.
Despite the fact that banks and commodities producers are heavily weighted in the UK stock market, this composition is beneficial during volatile times.
It may not have the same excitement as the go-go growth stocks that are so popular in the US but it can be a great investment. Coatsworth says that the UK has a wealth of dividends and is full of underappreciated companies with slow, steady growth.
Noffke is in agreement.
We have a sectoral mix which is independent or not entirely dependent on an AI theme. We’re cheap. We are cash rich. We’re buying a lot of shares back, and are quite shareholder-friendly. We’re also seeing many companies who, by combining top-down management with bottom-up investor support, have more ambition and grip.
The outlook for 2026 is positive
After several years of downward revisions, analysts have started to upgrade their earnings estimates for 2026-2027.
AJ Bell predicts that the FTSE 100 index will be at 10,750 by 2026. JPMorgan expects the FTSE 100 to reach 11,500 by the end of 2026.
Even so, the higher prices could be a problem. The UK market has become more expensive after the recent strong rally.
Mould stated that the FTSE 100 is trading at around 13.5 times forecasts of 2026.
The item is still discounted, but not as much as it was in the past.
The continued growth in earnings could lead to a more appealing valuation than initially thought.
Risks and rewards are influenced by the mix of sectors
According to consensus forecasts, 54% of FTSE 100 pre-tax profit in 2026 is expected to come from only three industries: oil and gas and mining.
Upgrades have already been driven by the strong operational performance of banks and miners, and sticky inflation may keep investors interested in hard assets such as commodities.
A sharp slowdown in the global economy or a recession could pose a risk, and undermine dividend growth as well as buyback programs.
Mould stated that the FTSE 100 was well positioned to face a future of inflation and growth.
But a return of low growth and low inflation in the 2010s will likely favor technology, long-term assets.
Investors are betting on the strength of earnings, returns to shareholders and diversification globally in order to continue supporting the market.
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