3 FTSE 100 predictions for 2026

2025 has been a blockbuster year for the FTSE 100. Here’s what Edward Sheldon thinks will happen with the stock market index in 2026.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Image source: Getty Images

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.

Edward Sheldon has positions in London Stock Exchange Group, Microsoft, Prudential, Sage, and Rightmove. The Motley Fool UK has recommended Lloyds Banking Group Plc, London Stock Exchange Group Plc, Microsoft, Prudential Plc, RELX, Rightmove Plc, Rolls-Royce Plc, Sage Group Plc, and Unilever. 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.

More on Investing Articles

Investing Articles

£10,000 buys 373 shares in this FTSE 100 heavyweight that’s tipped to surve in 2026

With analysts expecting the stock to climb 54% in the next 12 months, is now the perfect time for investors…

Read more »

This way, That way, The other way - pointing in different directions
Investing Articles

Are BP shares a slam-dunk buy as oil prices rocket – or is there a hidden danger?

As the oil price rises, investors might expect BP shares to follow. But Harvey Jones warns it may not play…

Read more »

Investing Articles

2 growth stocks to consider buying for an ISA in March

Here are two growth stocks I think are worth considering buying. Both have stumbled recently, even though the underlying businesses…

Read more »

Close-up of a woman holding modern polymer ten, twenty and fifty pound notes.
Investing Articles

How long might a Stocks and Shares ISA take to earn a £950 monthly second income?

Christopher Ruane explains how someone could seek to turn a Stocks and Shares ISA into a source of monthly passive…

Read more »

British pound data
Investing Articles

Get yourself ready for a violent stock market crash!

The FTSE 100 is sinking, raising fears of a fresh stock market crash. What are you doing about it? Here's…

Read more »

ISA Individual Savings Account
Investing Articles

Hands up, who’s dreaming of a million in a Stocks and Shares ISA?

How to make a million in a Stocks and Shares ISA, that's what headlines keep banging on about. Let's look…

Read more »

British Pennies on a Pound Note
Investing Articles

OK, who’s dreaming of making a million from red-hot penny shares?

Investors in penny shares can sound like the most upbeat optimists there are. It can work, but hopes need to…

Read more »

Three generation family are playing football together in a field. There are two boys, their father and their grandfather.
Investing Articles

Could this ultra-high-yielding FTSE 100 passive income gem quietly fund my retirement?

With rising payouts, strong cash generation and impressive earnings forecasts, this FTSE 100 dividend gem may be developing into a…

Read more »