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The FTSE 100 breezed effortlessly above 10,600 for the primary time in the present day (18 February). As I write mid-morning, it’s up 1.1% to 10,670, boosted by miners, banks and BAE Methods (+3.6%).
Simply as in 2025, the blue-chip index is thrashing the S&P 500 up to now this 12 months. In truth, the distinction is stark, with the US index down 0.5% 12 months to this point whereas the Footsie is up greater than 7%.
It could solely take one other 3.1% rise attain 11,000 factors. Given the highly effective momentum right here, I might be stunned if the FTSE 100 isn’t above that earlier than the World Cup this summer season.
May 12,000 even be on the playing cards by the top of 2026?
Charge cuts ahoy
Because of this, many economists now predict that rates of interest might be lower to three.5% subsequent month. Charges might then be decreased twice once more this 12 months, bringing the determine down to three%.
Including weight to the case for fee cuts is rising unemployment. At 5.2%, that is the best fee in a decade exterior the pandemic. So charges will seemingly be lowered to assist the financial system.
Issues are getting bizarre
One other factor that’s taking place is that issues are rapidly getting bizarre with AI. And as we all know, uncertainty is the market’s worst enemy.
Final summer season, I wrote that “AI is changing into so disruptive that it’d get tougher in future to efficiently decide the last word massive winners“. In different phrases, the expertise lowers limitations to entry and doubtlessly threatens the financial moats of many digital firms.
As such, a whole lot of traders are promoting tech/software program/knowledge shares and placing them into what the late Charlie Munger referred to as the “too hard” bucket. Too laborious, transfer on.
However after we take a look at the FTSE 100, it’s full of companies which are at little threat of AI disruption. You’ll be able to’t simply ‘vibe-code’ a rival to Glencore, GSK or Nationwide Grid. These resilient companies ought to even profit from AI to drive effectivity.
Shares of Glencore, GSK and Nationwide Grid have all gained greater than 20% in 2026. Tesco is up 20% in lower than a month!
Is 12,000 practical?
Moderately than selecting particular person shares, traders might take into account the Vanguard FTSE 100 UCITS ETF (LSE:VUKG). This low-cost tracker fund reinvests dividends from Footsie shares — collectively yielding 2.9% — to compound beneficial properties.
The highest of the ETF mirrors the FTSE 100, with the biggest 5 holdings being HSBC, AstraZeneca, Shell, Unilever, and Rolls-Royce. Clearly none of those are AI shares.
The principle threat with this fund is that traders out of the blue shift from worth again to Nasdaq progress shares. However with AI spending and disruption fears reaching fever pitch, I don’t see that taking place in 2026.
In truth, this FTSE 100 development might need some strategy to go, particularly with charges more likely to fall. To rise one other 12.5% to achieve 12,000 may be a stretch too far, however I believe 11,500 is certainly doable in 2026.
