The FTSE 250‘s performed poorly for what seems like ages now. Even in 2025, when most indexes have surged 15%-20% (including the FTSE 100), the mid-cap index has risen by around 8%, before dividends.
Over the past five years, the FTSE 250’s total return has only been around 34%. That’s not great. But with the new year nearly upon us, might 2026 be the FTSE 250’s time to shine?
What’s wrong?
Unlike the FTSE 100, the FTSE 250 contains a lot of domestically-focused companies. Around half of revenue comes from these shores, making it more of a barometer for the health of the UK economy.
Unfortunately, as we’re all aware, the economy’s flatlined for a long time now, with very poor productivity rates. We can argue till the cows come home what the structural barriers preventing UK economic growth are. But in my opinion, stifling regulation and high taxes are two key contributing factors.
The UK also has some of the world’s highest energy bills. So it’s incredibly expensive to manufacture things here and operate businesses, which is obviously having a negative impact. Consumers also have less disposable income due to this.
Combine this with anaemic economic growth and it’s easy to see why the UK’s mid-cap share index continues to underwhelm. This is a shame because there are some cracking companies in the FTSE 250.
Another thing holding the index back is the poor performance of investment trusts. They make up around a third of the constituents but trade at an average 13% discount to their underlying asset values.
What about 2026?
Given all this, I don’t see the FTSE 250 having a rip-roaring 2026. But lower interest rates could help by boosting retail stocks while also potentially luring money back into undervalued investment trusts. So if the UK economy doesn’t weaken, I think the FTSE 250 will rise in 2026.
Currently, the index trades at 13 times earnings versus around 18 for the FTSE 100. This suggests there are plenty of undervalued mid-cap shares waiting to be found.
Cheap shares
I think Moonpig‘s (LSE:MOON) potentially one of them. The stock’s fallen 21% since June and 50%+ since listing in 2021.
Now around 200p, it’s trading at just 10.8 times next year’s forecast earnings. My view is that this is cheap for the UK’s leading online greetings card company, which has over 12m customers.
Crucially, Moonpig has a vast database of 107m customer occasion reminders (birthdays, anniversaries, etc). So it knows when a customer needs to buy a card and/or gift for someone, which is incredibly valuable for repeat sales.
Of course, the tough UK retail market backdrop undoubtedly adds risk. But in the six months to the end of October, revenue rose 6.7% to £169m, boosted by expansion into Ireland, Australia and the US. Overseas sales jumped more than 32%, while earnings are growing by double digits.
Meanwhile, more customers are signing up for the Moonpig Plus subscription service, as well as using AI-generated stickers, audio and video messages. I’ve recently started using the app myself (it saves me trips to my local Tesco for cards!).
I think Moonpig’s worth considering. It’s just one of a few FTSE 250 opportunities I see as we head into 2026.
