Where will the FTSE 100 begin 2026?

The record highs keep on coming. The FTSE 100 posted another on 22 August when the 9,300 mark came and went. 

The storming 2025 for London’s leading index capped a storming 2024. The Footsie has been surging since the pandemic really, up 66% in five years. That’s not even taking into account half a decade’s worth of generous dividends. 

So where does it go from here? Fresh records until 2026 and primo champagne in corner offices? Or will boardrooms be sombrely bringing in the new year with cheap plastic cups and supermarket own-brand? Here are two possible outcomes. 

Optimistic prediction: the FTSE 100 surpasses 10,000

Let’s start with the good stuff. 

The Footsie could surpass 10,000 before the year is through and it wouldn’t even require too much more growth. The FTSE 100 stands at 9,300 as I write, which is only 7.5% away from the five-digit figure. A 19% gain in one trip around the sun has been achieved multiple times this century already, and there are reasons to think recent growth is part of a larger trend. 

High inflation is correlated with share price growth — not perfectly, mind — but companies do tend to have inflation-resistant tendencies. Also, the recent influx of investors onto the defensive-minded London index might continue if concerns grow about the lack of earnings from tech and AI over in the States. 

Should the Footsie smash this target, Tesco (LSE: TSCO) shares would be worth looking at, for my money. The nation’s largest supermarket has been outperforming the FTSE 100, up 14% year to date. The battle against inflation is one rarely far from income statements and earnings calls, but margins have stayed consistent. 

With a reasonable valuation, a chunky dividend yield, and extremely defensive operations, the red and blue shop might be leading the vanguard of further FTSE 100 growth.

Pessimistic prediction: the FTSE 100 falls near 8,000

Though the Footsie has plenty to cheer about, there are some ominous-looking clouds on the horizon. Tariffs remain a question mark and may hit the 100 largest listed companies in London, given around 80% of revenue is drawn from abroad. 

Any kind of global economic slowdown, especially in two key markets of US and China, could lead to a slump by the time we’re ringing in the new year. The FTSE 100 is hardly insulated from domestic matters, either. With bond yields above 2022 levels and some painful tax rises rumoured to be on the agenda, a pessimist might say the 8,360 the Footise started the year with could be where it ends, too. 

After the sale of Tesco’s Asian operations, the plight its shares will hinge more on domestic matters than anything else. With a £50bn black hole rumoured to be in the budget, the country could be looking at rises on the big ticket taxes like income tax or VAT, which would reduce consumer spending. 

The century-old shop has weathered many a crisis before, so I have no plans to sell the shares I own. And with a price-to-earnings ratio of 18 and a forward dividend yield of 3.21% thrown into the bargain, I’d say this stock was one to consider.

The post Where will the FTSE 100 begin 2026? appeared first on The Motley Fool UK.

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John Fieldsend has positions in Tesco Plc. The Motley Fool UK has recommended Tesco Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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