At this time of year, I like to make a few FTSE 100 predictions for the following year. I don’t make forecasts for where the index will finish the year (that’s a mug’s game as no one knows) but instead make a few broad calls to help investors position their portfolios.
Interested in seeing my predictions for 2026? Read on…
2025 review
First, let’s see how my calls for 2025 fared. In December 2024, I said that in 2025:
- We’d see takeover activity within the Footsie
- There would be big gains from individual stocks
- The FTSE 100 wouldn’t hit 10,000
Prediction one was correct with bids coming in for the likes of Rightmove and Anglo American. But I must admit, takeover activity has been a bit underwhelming this year – I was expecting more given the low valuations across the market at the start of the year.
Number two was definitely on the mark. This year, lots of Footsie stocks have risen 50% or more including Lloyds, Rolls-Royce, and Prudential.
Of course, with a few weeks left in the year, number three is still uncertain. The index hasn’t hit 10,000 yet but it’s not that far off!
The outlook for 2026
As for my predictions for 2026, here they are:
- Index returns won’t be as strong: This year, the FTSE 100 is up almost 20%. I can’t see that kind of return again in 2026 – I believe returns will be lower. I reckon 2026 will be more of a stock picker’s market.
- There will be a refocus on quality: while the Footsie has done well this year, a lot of high-quality stocks haven’t participated in the rally. Examples here include London Stock Exchange Group (LSE: LSEG), RELX, Sage, Unilever, and Rightmove. I think these kinds of stocks will get more attention in 2026.
- A muted year for Footsie banks: bank stocks have surged in 2025. I suspect returns from this sector won’t be as flashy in 2026.
A Footsie stock to consider for 2026
Put all this together, and one stock that could be worth a look for 2026 is London Stock Exchange Group or LSEG as it’s known. It has been a dud this year but I see the potential for outperformance relative to the market in 2026.
Today, it’s one of the largest providers of financial data in the world. In other words, it’s a software company.
It doesn’t trade like one at the moment, however. At present, the price-to-earnings (P/E) ratio is only around 19 so there appears to be an opportunity here.
What I like about this company is that it serves blue-chip enterprise clients (banks and investment managers). These kinds of companies are unlikely to suddenly disappear.
I also like the fact that it has a partnership with Microsoft and is rolling out AI solutions for customers. These should enhance its offering and provide the company with the ability to charge more.
A risk is that banks and investment managers aggressively downsize in the years ahead and require fewer licenses from LSEG. This could slow growth.
At the current P/E ratio, however, I reckon a lot of this risk is baked into the share price. I like the risk/reward skew and believe the stock is worth considering.
But it’s not the only high-quality Footsie name worth a look for 2026.
