The FTSE 100 reached a new record closing high of 9,787 points on Monday, extending a near-20% rally since the start of the year. After years in the shadows, the FTSE 100 has staged a powerful comeback – and with momentum still strong, attention is now turning to the next milestone: 10,000 points. Jemma Slingo, Fidelity International examines its fortunes.
Analysts think it can get there. They have set a target price of around 10,778 points for the FTSE 100 – roughly 10% higher than its current level. Target prices, devised by equity analysts, reflect expectations for how an index might perform over the next six to twelve months. While forecasts can prove accurate, they are not always reliable – as seen in 2022, when a wave of interest rate hikes derailed overly optimistic projections.
Jemma Slingo, Pensions and Investment Specialist, Fidelity International comments:
“As 2025 draws to a close and investors look ahead to the new year, attention is turning to whether the FTSE 100’s momentum can carry into 2026. The index’s performance this year has challenged the idea that London’s market is a ‘dinosaur’, and investors are beginning to take notice.”
Diving under the bonnet
Critics have long described London as the ‘Jurassic Park’ of stock exchanges, due to its heavy weighting towards older industries such as banking, oil and tobacco. These sectors typically pay strong dividends but are not known for rapid growth. Technology companies make up just 3.5% of the FTSE 100, compared with around a third of the S&P 500 – a key reason why the UK has lagged behind North America over the past decade.
Jemma Slingo continues:
“What’s interesting now is that the FTSE 100’s ‘old fashioned’ make-up is starting to work in its favour. Higher interest rates have turbocharged banks after years of underperformance, while miners such as Fresnillo are riding high on stronger gold prices. Defence has also been a standout performer as governments across Europe ramp up military spending.”
FTSE 100’s best performers
Rolls-Royce, for instance, has been one of the FTSE 100’s star performers under chief executive Tufan Erginbilgiç. Since his appointment in 2023, the company’s revenues, profits and cashflow have surged, debt has fallen, and analyst forecasts have been repeatedly upgraded
FTSE 100’s best performing companies
| 5 years | 3 years | 1 year |
| Rolls Royce | Rolls Royce | Fresnillo |
| Babcock International | Babcock International | Airtel Africa |
| Centrica | 3i Group | Babcock International |
| Airtel Africa | Marks & Spencer | Rolls Royce |
| NatWest | Standard Chartered | Endeavour Mining |
Valuations: A reason for optimism
No one can know for certain whether these companies or sectors will keep performing. Gold miners have a habit of making blunders when times are good, and the outlook for banks is uncertain as interest rates slowly come down.
There is still a big factor working in the FTSE’s favour, however: valuation. Sentiment has improved towards UK companies this year, but the FTSE 100 still lags the US and Europe from a price/earnings perspective. The discrepancy has become more extreme since 2021.
Slingo adds:
“As investors diversify away from the US market – which looks increasingly expensive and concentrated – there’s still room for UK valuations to improve. Overall FTSE 100 companies generate around a quarter of their sales in the US, giving investors exposure to the American economy at a discount.”
However, growth remains an important consideration. US companies have expanded faster than UK ones, meaning the valuation gap looks smaller when growth is factored in. The FTSE 100’s PEG ratio – which shows how expensive a stock or index is relative to how fast it is expected to grow – stands at 1.6, compared with 2.0 for the S&P 500. In other words, there’s still a gap, but not a gulf.
How to invest in the FTSE 100
There are lots of ways to invest in the UK market. Those who want low fees and low fuss may be drawn to index trackers such as the iShares Core FTSE 100 ETF.
You may prefer an active approach, however. The FTF Martin Currie UK Equity Income Fund is one of three actively managed UK funds on Fidelity’s Select 50 list.
Managed by Ben Russon, Will Bradwell and Joanne Rands out of Leeds, this fund aims to generate a higher income than the FTSE All-Share Index plus investment growth over a three to five-year period after fees and costs. Its holdings include some of the UK’s largest dividend payers, including Unilever, Shell and AstraZeneca, as well as some mid-cap companies.
Other active funds on the Select 50 include the Fidelity Special Situations Fund and the Liontrust UK Growth Fund.
