The FTSE 100 shares index has just enjoyed its best year since 2009. Rising 20% during 2025, some of the UK’s highest-quality shares like HSBC, BAE Systems, and Games Workshop have delivered enormous returns.
But a rising tide lifts all boats, as they say. And rising enthusiasm for Footsie shares saw some less robust companies leap higher as well. With many such stocks now trading on elevated multiples, there’s a danger of some serious price corrections happening in 2026.
Next (LSE:NXT) and NatWest (LSE:NWG) are two FTSE 100 stocks I believe could fall off a cliff this year. Want to know why?
Next
Next’s share price rose 40% in 2025, reflecting its spectacular resilience in an otherwise tough time for UK retail. Latest financials showed full-price sales growth of 10.5% in Q3. That was more than double the company’s own guidance.
The clothing giant’s enormous brand power is helping it to defy gravity, as is its dominant position online. The worry is that last year’s share price gains now make Next shares enormously expensive.
At £135.80 per share, its forward price-to-earnings (P/E) ratio now sits at 18.6 times. That’s miles above the 10-year average of 13.8 times. And if trading shows signs of weakening, it could lead to a colossal share price drop.
In a potentially worrying sign, Next’s decided to launch its December sales promotions earlier this year on Christmas Eve. It came shortly after the British Retail Consortium (BRC) said Brits’ retail spending dropped this month (to +6 from +8 in November).
Next’s move may also reflect severe competition as other retailers slashed prices pre-Christmas. Competition in the clothing sector is a constant and powerful threat to companies’ sales and profit margins.
Consumer spending is tipped by many analysts to weaken in 2026 as the economy weakens. It’s a scenario that may have serious implications for Next’s shares, and especially at current elevated prices.
NatWest
NatWest is another potential casualty of the economic environment. Unlike some other FTSE 100 banks, it has little-to-no exposure to overseas territories to help it grow earnings when times are tough at home.
Yet despite the gloomy outlook, NatWest’s share price rose 62% over the course of 2025. Its a rise that — as with Next — leaves it looking dangerously expensive in my book.
At 652.6p per share, the bank trades on a price-to-book (P/B) ratio of 1.4. That’s more than double the 10-year average of 0.7.
What’s more, at above 1, it shows NatWest trading at a premium to its asset values.
There been some good things going on at the banking giant over the past year. Loan growth and margin progression drove income 15.7% higher in Q3, higher than forecast. Its excellent brand power has helped it to stay afloat in challenging conditions.
But can the company keep beating forecasts? I’m not so sure. As I say, the economic landscape look set to worsen, raising the prospect of declining revenues and increasing bad loans. It’s also under pressure as competition from challenger banks increases, while falling interest rates pose additional risks to margins.
Risk-tolerant investors might want to consider NatWest and Next shares. But I won’t be buying either of these FTSE 100 stocks for my portfolio.
