Prediction: 2026 will be the FTSE 100’s worst year since 2020
With this year almost done, 2026 has been very rewarding for investors. Major stock markets — such as New York, London, and Tokyo — have surged to new heights this year. However, after four highly profitable years, I’m worried 2026 could be a poor year for the UK’s FTSE 100, US S&P 500, and the like.
Fabulous FTSE
Over the last six years, the outstanding shares to own for global investors have been US mega-cap tech stocks. Shares in the so-called Magnificent Seven have surged to all-time highs, delivering many trillions of dollars of gains. However, with US stock markets trading close to record levels, some fear this is a bubble doomed to burst.
However, what many people may not have noticed is that the ‘boring, old-economy’ FTSE 100 index has absolutely thrashed the S&P 500 over the past year. The Footsie has leapt by 22.2% over 12 months, versus 14.4% for its American cousin.
Furthermore, FTSE firms often pay generous cash dividends — the index’s dividend yield is hovering around 3.1% a year. Meanwhile, the current yearly cash yield for the S&P 500 is just over 1.1%. That’s another couple of percentage points in the UK index’s favour.
In sterling terms, this gap is becomes a gulf, thanks to the pound rising against the US dollar. For UK investors, the S&P 500’s total return is just 10.8% over the last 12 months — less than half that of its British rival.
My family are delighted that UK shares have surged since 2024, as our portfolio includes around 25 FTSE 100 and FTSE 250 value/dividend/income shares.
Trouble in 2026?
When investors buy assets at sky-high prices, future returns generally suffer. Hence, I’m worried that next year might be poor for the major US indexes (the S&P 500 and Nasdaq Composite). Alas, falling US markets would likely drag London down, because “when New York sneezes, London catches cold” — as one old City saying goes.
In short, I expect 2026 to be the FTSE 100’s worst year since Covid-hit 2020, when the index returned -11.6%. As the future is inherently uncertain, I won’t guess London’s returns next year. That said, I’m convinced they won’t match the galloping gains of the last four years.
Bargain Bunzl?
As a value investor, I often rummage in the FTSE 100’s bargain bin for undervalued stocks. Earlier, I spotted that one of my family portfolio’s latest purchases is among the Footsie’s worst performers this year.
The index’s second-biggest loser in 2026 is bombed-out Bunzl (LSE: BNZL), whose shares collapsed on 15 April after poorly received results. At its 52-week high on 13 February, this stock briefly touched 3,488p. At their 2026 low on 17 December, the shares hit 2,050p, having collapsed more than two-fifths (-41.2%).
On Friday, 19 December, Bunzl stock closed at 2,094p, valuing this global distribution and outsourcing business at just £6.8bn. Meanwhile, Bunzl’s plunging share price has reduced its valuation to 14.4 times trailing earnings. This delivers an earning yield of 6.9%, thus the firm’s market-beating dividend yield of 3.5% a year is covered almost twice by historic earnings.
If global stock markets do head south next year, then I expect Bunzl stock to follow suit. Yet its conservative business model should turn this business around over time, so we won’t sell our stake!
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The Motley Fool UK has recommended Bunzl. Cliff DâArcy has an economic interest in Bunzl shares. 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.
