There is no shortage of doom and gloom around the prospects of the British economy. But you would not know that from looking at the performance of UK shares.
Last year, for example, the FTSE 100 index of leading UK shares moved up by around a fifth.
For a collection of mostly long-established companies in mature industries, that is a fairly exciting performance in my view.
So, could 2026 be another vintage year?
The economy and the market are not the same
Heading into the year, there are a number of ongoing reasons for concern.
The UK economy looks weak, global geopolitical risks remain elevated and there are signs of slowing consumer spending in many markets.
Then again, the same was true at this stage last year – and the FTSE 100 still did well. A weak economy does not necessarily lead to a weak stock market, especially in the short-to-medium term.
On top of that, there are some possible grounds for optimism about the coming 12 months.
For example, momentum has been building over the past year towards ending the Russian war in Ukraine. Some emerging markets are growing handily. The tariff volatility of last year could hopefully become a distant memory.
From a positive angle, then, it could be that 2026 does indeed turn out to be a great year for UK shares.
Here’s my investing plan for 2026!
In reality, we just do not know.
However, that does not change how I plan to invest in the stock market this year.
Every year, no matter how well the wider stock market does, some individual companies fare well while others fare badly even when the economy is riding high.
There is a difference between the performance of a stock market index and how each individual share within it performs. That was true last year – and it will be true in 2026 as well.
That explains why, rather than buying an index (for example, by investing in an index tracker), I aim to hold a well-rounded, diversified portfolio of what I see as high-quality shares bought at attractive prices. Some well-known UK shares form part of that portfolio.
This year, I expect to keep doing the same thing.
Down, but is it out?
One of the UK shares I bought last year using that approach is FTSE 100 brewer and distiller Diageo (LSE: DGE).
As a believer in the potential financial benefits of taking a long-term approach to investing, I plan to keep holding Diageo across 2026 and beyond.
It had an awful 2025. Now it has changed management, but that does not necessarily mean it will be able to conquer the challenges facing it (and many of its rivals).
Those include weak consumer spending on luxury spirits today – and weakening alcohol consumption trends over the longer term. Both help explain why Diageo shares fell in 2025.
But with its decades-long record of annual dividend per share growth, the 5%-yielding UK share is attractive from an income perspective – if the dividend lasts.
And with its strong brand portfolio, global distribution muscle, massively profitable business model and unique, iconic production sites, I remain optimistic about the outlook for the British drinks giant.
