Strangely enough, this is partly a repeat of what happened exactly a year ago. On 9 April 2025, President Trump paused his reciprocal tariff increases, sending the S&P 500 up 9.5% (one of its best days ever). The FTSE 100 quickly went higher too.

As such, anyone who invested a year ago would have made one of the best-timed index investments ever. On 9 April, the FTSE 100 had finished the day languishing at 7,679. Fast forward to close of play on Wednesday when it was at 10,608!

Therefore, a £20,000 investment made a year ago in a FTSE 100 index tracker fund would now be worth around £27,680.

That’s before dividends. With an accumulating fund like Vanguard FTSE 100 ETF (LSE:VUKG), where the dividends are reinvested, the return would be roughly £28,500. A 42.5% total return!

Time in the market

As mentioned, such a barnstorming return in this space of time is rare, as is the ability to accurately time such an investment.

It’s often talked about, but it’s worth repeating that most of the stock market’s best days come closely after the worst days. Missing out on a few of the big up days can have a devastating impact on long-term returns.

The chart below shows the S&P 500, but the same applies to the FTSE 100. Missing the best 10 days over the last 20 years would have resulted in a significantly lower return.

To me, this shows how staying invested — and buying when there’s market panic — can really pay off. As the old investing adage says, its “time in the market, not timing the market” that produces the best results.

Value on offer?

Returning to the FTSE 100 tracker ETF above, is it still worth a look after rocketing almost 43% in a year? I think it is, even though a fair amount of risk still exists due to high inflation and the potential for the Iran war to resume.

As noted, this fund reinvests dividends to supercharge the compounding process. And even the recent surge, the FTSE 100’s trailing dividend yield is still around 3%.

What’s more, when I look at the top of the index, I really like some of the stocks. For example, AstraZeneca has a world-class portfolio of oncology drugs, with a pipeline of more than 100 Phase III studies ongoing.

Looking ahead, AstraZeneca is betting heavily on antibody-drug conjugates. These are often called ‘biological missiles’ because they deliver high-dose chemotherapy directly to cancer cells while sparing healthy ones. AstraZeneca is far from the lumbering pharma giant of old! 

Elsewhere, Rolls-Royce is set to benefit from rising global travel, higher defence spending, and potentially small modular reactors (SMRs). HSBC is nicely positioned to benefit from the high-growth markets of Asia and the Middle East.

The FTSE 100 also still looks cheap, trading at around 17.5 times earnings. And it offers extremely cheap exposure to data/tech stocks like Experian, Sage, RELX, London Stock Exchange Group, Rightmove, and Autotrader.

If and when fears around AI extinction subside, I believe some (or all) of these shares have the potential to re-rate higher.

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However, in reality, the average saver doesn’t max out their annual SIPP allowance (which can be as much as £60,000, depending on income). Therefore, SIPPs tend to receive smaller lump sums or are drip-fed throughout the year.

But they can be worth it, and not just for the 20% government tax relief. Because had someone invested £10,000 in a FTSE 100 index tracker on 7 April — the first trading day of the current tax year — they would have generated a tremendous return.

Take the Vanguard FTSE 100 UCITS ETF (LSE:VUKG), for example. This is an accumulating version, meaning any dividends paid out by the 100 Footsie companies are automatically reinvested back into the fund. Doing this helps returns compound faster.

On 7 April 2025, one share of this FTSE 100 ETF cost £39.47. Fast-forward to now, and each trades for £52.78.

For those keeping count, that’s a 33.7% return. So the £10,000 investment would now be worth just under £13,400 (excluding platform fees). And there would also have been £2,500 tax relief from the government.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Buying on dips

Now, I should mention that early April was a somewhat fortuitous starting point. Back then, President Trump declared his tariffs to the world and this sent the stock market into a rapid tailspin.

However, history shows repeatedly that such times are always been the best to invest (the return here proves this to be the case, yet again). But it doesn’t feel sensible to be investing at the time when fear and uncertainty are both rising. Hindsight is a wonderful thing, after all.

But even over five years, this ETF would have turned £10,000 into £17,700. So it has proven to be a steady wealth-builder over time.

What about now?

Right now, though, fears are rising again. We’re nowhere near April’s level of panic, but the war in Iran combined with rising inflation and weak employment figures are casting doubts in investors’ minds.

Put simply, the risks are multiplying.

As a result, the FTSE 100 has fallen almost 10% since the end of February, putting it close to correction levels. So, is the Vanguard FTSE 100 ETF worth a look now?

I think it is. There are many high-quality defensive firms in the index, including Unilever, British American Tobacco, National Grid, AstraZeneca, and BAE Systems. Each have their own individual risks, of course, but their revenues tend to be more insulated from macroeconomic turbulence.

Naturally, the index is heavily skewed towards its largest constituents. Were these to underperform, then the ETF could struggle to replicate its past performance.

However, over the long term, I’m bullish on some of these names, particularly HSBC, AstraZeneca, and Rolls-Royce. Moreover, most of these firms pay rising dividends, which adds to the investment case for the ETF.

As markets wobble, I think this FTSE 100 tracker is worth considering for a Stocks and Shares ISA or SIPP (or both).

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Just as in 2025, the blue-chip index is beating the S&P 500 so far this year. In fact, the difference is stark, with the US index down 0.5% year to date while the Footsie is up more than 7%.

It would only take another 3.1% rise reach 11,000 points. Given the powerful momentum here, I would be surprised if the FTSE 100 isn’t above that before the World Cup this summer.

Might 12,000 even be on the cards by the end of 2026?

Rate cuts ahoy

The news boosting the index today was that inflation had fallen to 3% in the year to January. The Office for National Statistics said this was helped by the cost of bread and petrol.

As a result, many economists now predict that interest rates will be cut to 3.5% next month. Rates could then be reduced twice again this year, bringing the figure down to 3%.

This would obviously be good news for inflation-weary consumers. And we can see this reflected in the domestic-focused FTSE 250 index, which is now at a four-year high.

Adding weight to the case for rate cuts is rising unemployment. At 5.2%, this is the highest rate in a decade outside the pandemic. So rates will likely be lowered to support the economy.

Things are getting weird

Another thing that’s happening is that things are quickly getting weird with AI. And as we know, uncertainty is the market’s worst enemy.

Last summer, I wrote that “AI is becoming so disruptive that it might get harder in future to successfully pick the ultimate big winners“. In other words, the technology lowers barriers to entry and potentially threatens the economic moats of many digital companies.

As such, a lot of investors are selling tech/software/data stocks and putting them into what the late Charlie Munger called the “too hard” bucket. Too hard, move on.

But when we look at the FTSE 100, it’s packed with firms that are at little risk of AI disruption. You can’t just ‘vibe-code’ a rival to Glencore, GSK or National Grid. These resilient businesses should even benefit from AI to drive efficiency.

Shares of Glencore, GSK and National Grid have all gained more than 20% in 2026. Tesco is up 20% in less than a month!

Is 12,000 realistic?

Rather than picking individual stocks, investors could consider the Vanguard FTSE 100 UCITS ETF (LSE:VUKG). This low-cost tracker fund reinvests dividends from Footsie stocks — collectively yielding 2.9% — to compound gains.

The top of the ETF mirrors the FTSE 100, with the largest five holdings being HSBC, AstraZeneca, Shell, Unilever, and Rolls-Royce. Obviously none of these are AI stocks.

The main risk with this fund is that investors suddenly shift from value back to Nasdaq growth stocks. But with AI spending and disruption fears reaching fever pitch, I don’t see that happening in 2026.

In fact, this FTSE 100 trend might have some way to go, especially with rates likely to fall. To rise another 12.5% to reach 12,000 might be a stretch too far, but I think 11,500 is definitely doable in 2026.

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But will it work? And which UK stock is worth considering for a new investor thinking about starting a Stocks and Shares ISA?

The benefits of investing

Stepping back, I agree with the sentiment behind this move. As Sarah Coles, head of personal finance at Hargreaves Lansdown, points out: “We need an investment culture in the UK, and some of the money that has been saved in Cash Isas would work harder for people if it was invested instead.”

This is indisputable, with all evidence showing that investing wipes the floor with cash when it comes to long-term returns. And an investor doesn’t have to be a mastermind like Warren Buffett to do well in the stock market.

For instance, someone who invested £20,000 in a simple tracker like the Vanguard FTSE 100 ETF (LSE:VUKG) five years ago would now have £41,100. For cash, it would likely have been less than £23,000 (not even beating inflation).

Will savers switch?

Yet, despite all the evidence that stocks outperform cash, I’m not convinced most savers will suddenly become investors. According to new research from KPMG UK, 87% of adults with Cash ISAs won’t invest in stocks when the allowance is reduced.  

Therefore, the impact on UK stock prices is likely to be minimal, in my opinion. But at least it’s a start.

Savers remain firmly rooted in cash, with many unlikely to pivot into equities even if the Cash ISA allowance is cut. This is particularly true for 18 to 24-year-olds, who, despite having the longest investment runway, are among the least inclined to move into stocks and shares. Neil Connor, Head of Wealth and Asset Management, KPMG UK.

This is sad to read because a 20-year-old starting out today could set themselves up for an incredibly comfortable retirement. For example, investing £500 every month at an 8% return would lead to a £2.4m ISA portfolio by the time they are 65!

The simple ETF

So what about someone who is thinking about switching money from cash to stocks? What do I think is worth considering?

Well, returning to the FTSE 100 ETF above, I think this might be a good choice right now. At least as a steady starter option for cautious investors.

It gives instant exposure to all the stocks in the blue-chip index, including heavyweights like AstraZeneca, HSBC, and Rolls-Royce. And this version of the ETF is accumulating, which means it automatically reinvests dividends back into the fund.

Moreover, unlike the S&P 500, it doesn’t have a lot of concentrated tech exposure. So the index could reduce near-term volatility if fears of an AI bubble provoke a serious tech stock sell-off.

That said, if investors turn bearish on UK equities, which happened both after the financial crisis and Brexit, then the index could underperform for a while.

Alternatively, a braver investor could take the plunge with individual FTSE 100 stocks. That’s arguably a bit more risky, but the potential returns can be significantly higher.

Just look at Rolls-Royce — the engine maker’s shares are up more than 1,000% in three years!

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However, the Footsie’s returns over the last five years may surprise you. Here’s a look at how much £10,000 invested in a FTSE 100 tracker fund five years ago would be worth today.

10.5% a year?

There are lots of different FTSE 100 tracker funds on the market today. To keep things simple, I’m going to use the Vanguard FTSE 100 UCITS ETF (LSE: VUKG) as a proxy for such trackers.

I’m focusing on the ‘accumulating’ version of the ETF as opposed to the ‘distributing’ version. The former reinvests all dividends (a large component of FTSE 100 returns) while the latter pays them out to investors.

Five years ago, this ETF was trading for £26. Today however, it’s trading for £43 – roughly 65% higher.

That works out to an annual return of about 10.5%. And it means that a £10,000 investment five years ago would now be worth about £16,500 (ignoring trading commissions and platform charges).

The high returns explained

That’s a high return from the FTSE 100. The annualised return of 10.5% return is significantly higher than the 20-year average return from the index, which is a little over 6%.

So, what’s going on here?

Well, back in the second quarter of 2020, there was a lot of economic uncertainty due to the coronavirus pandemic (which had just started). As a result, many FTSE 100 shares were trading at low levels.

Over the last five years, however, most shares have recovered (many have gone on to hit new all-time highs). So, anyone who invested in the FTSE 100 during the early 2020 weakness has been rewarded financially.

This is a great example of why it can pay to follow Warren Buffett’s advice and invest when there’s a high level of uncertainty and other investors are ‘fearful’. Often, buying stocks during market weakness can deliver higher-than-average returns over the long run.

An opportunity today?

It’s worth pointing out that there’s a lot of fear within the investment community today given the high level of economic uncertainty we are faced with at present.

Recently, many investors – both retail and institutional – have been dumping stocks and piling into bonds and cash. So, there could potentially be another major opportunity for long-term investors right now.

Having said that, there’s a chance that the market could go lower from here. So, I wouldn’t recommend going ‘all-in’ on stocks in one go. I Think investors should consider saving some cash for any near-future corrections.

I also think there are better investments to consider than the Vanguard FTSE 100 UCITS ETF and other Footsie trackers. The issue with these products for me is that they don’t provide much exposure to the technology sector.

And that’s a sector that I think investors should have plenty of portfolio exposure to over the next five years. After all, the world is only going to become more digital in the years ahead.

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