Picture supply: Getty Photographs
The FTSE 100 breezed effortlessly above 10,600 for the first time in the present day (18 February). As I write mid-morning, it’s up 1.1% to 10,670, boosted by miners, banks and BAE Methods (+3.6%).
Simply as in 2025, the blue-chip index is thrashing the S&P 500 to date this yr. In actual fact, the distinction is stark, with the US index down 0.5% yr thus far whereas the Footsie is up greater than 7%.
It might solely take one other 3.1% rise attain 11,000 factors. Given the highly effective momentum right here, I might be stunned if the FTSE 100 isn’t above that earlier than the World Cup this summer time.
May 12,000 even be on the playing cards by the finish of 2026?
Charge cuts ahoy
The information boosting the index in the present day was that inflation had fallen to three% in the yr to January. The Workplace for Nationwide Statistics stated this was helped by the value of bread and petrol.
Consequently, many economists now predict that rates of interest might be reduce to three.5% subsequent month. Charges might then be decreased twice once more this yr, bringing the determine down to three%.
This is able to clearly be excellent news for inflation-weary customers. And we will see this mirrored in the domestic-focused FTSE 250 index, which is now at a four-year excessive.
Including weight to the case for fee cuts is rising unemployment. At 5.2%, that is the highest fee in a decade exterior the pandemic. So charges will seemingly be lowered to assist the financial system.
Issues are getting bizarre
One other factor that’s taking place is that issues are rapidly getting bizarre with AI. And as we all know, uncertainty is the market’s worst enemy.
Final summer time, I wrote that “AI is changing into so disruptive that it’d get more durable in future to efficiently choose the final large winners“. In different phrases, the know-how lowers boundaries to entry and doubtlessly threatens the financial moats of many digital corporations.
As such, numerous traders are promoting tech/software program/knowledge shares and placing them into what the late Charlie Munger referred to as the “too laborious” bucket. Too laborious, transfer on.
However once we take a look at the FTSE 100, it’s filled with corporations which might be at little threat of AI disruption. You may’t simply ‘vibe-code’ a rival to Glencore, GSK or Nationwide Grid. These resilient companies ought to even profit from AI to drive effectivity.
Shares of Glencore, GSK and Nationwide Grid have all gained greater than 20% in 2026. Tesco is up 20% in lower than a month!
Is 12,000 real looking?
Fairly than choosing particular person shares, traders might contemplate the Vanguard FTSE 100 UCITS ETF (LSE:VUKG). This low-cost tracker fund reinvests dividends from Footsie shares — collectively yielding 2.9% — to compound beneficial properties.
The prime of the ETF mirrors the FTSE 100, with the largest 5 holdings being HSBC, AstraZeneca, Shell, Unilever, and Rolls-Royce. Clearly none of those are AI shares.
The important threat with this fund is that traders immediately shift from worth again to Nasdaq progress shares. However with AI spending and disruption fears reaching fever pitch, I don’t see that taking place in 2026.
In actual fact, this FTSE 100 development might need some technique to go, particularly with charges more likely to fall. To rise one other 12.5% to succeed in 12,000 is perhaps a stretch too far, however I believe 11,500 is certainly doable in 2026.
Source link
#FTSE #soars #playing cards
