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

The Milky Way at night, over Porthgwarra beach in Cornwall
Investing Articles

£15,000 invested in red-hot Scottish Mortgage shares 1 month ago is now worth…

Scottish Mortgage shares are having a moment, and Harvey Jones says it's mostly down to its exposure to Elon Musk's…

Read more »

UK financial background: share prices and stock graph overlaid on an image of the Union Jack
Investing Articles

Are IAG shares the ultimate FTSE 100 volatility play? 

IAG shares ended last week on a high, and has held up pretty well during the Middle East crisis. But…

Read more »

Abstract 3d arrows with rocket
Investing Articles

Will the stock market go off like a rocket on Monday?

Middle East turmoil is yet to trigger a full-blown stock market crash. Harvey Jones says the recent recovery could have…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

Here’s what £15,000 invested in Taylor Wimpey shares on Thursday is worth today…

Investors holding Taylor Wimpey shares finally had something to celebrate on Friday as the beaten-down FTSE 250 housebuilder rallied. What…

Read more »

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

How much would it take to turn an ISA into a £1,000-a-month passive income machine?

Focusing on dividend shares in well-known, big companies, what would it take for someone to target a four-figure monthly passive…

Read more »

Female Tesco employee holding produce crate
Investing Articles

2 reasons a stock market crash could be a good thing!

Our writer does not know when the next stock market crash might arrive. But he hopes that, whenever it does,…

Read more »

Close-up image depicting a woman in her 70s taking British bank notes from her colourful leather wallet.
Investing Articles

How much do I need in a Stocks and Shares ISA to target a £13,400 annual income?

£13,400 is the minimum required income for retirement. But how big does a Stocks and Shares ISA need to be…

Read more »

Woman riding her old fashioned bicycle along the Beach Esplanade at Aberdeen, Scotland.
Investing Articles

Want to aim for £31,353 more than the State Pension? A SIPP could be the answer

The State Pension offers a safety net, but here’s why you could consider a Self-Invested Personal Pension (SIPP) for a…

Read more »