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At the beginning of 2025, the FTSE 100 stood at 8,200. On the finish of 2025, the index had risen to 9,900. The 22% achieve was a monster return and didn’t even embrace a number of the highest dividends obtainable worldwide. Many onlookers had been calling it a one-off, suggesting that it was a quick reversion to the common after a couple of years of underperformance.
What occurred subsequent? The Footsie proved all of them flawed! The index stored rising, up one other 10% in solely a few months! Its 1 March whole of 10,900 got here inside a stone’s throw of the massive 11,000 mark. How did it get there so rapidly? Can it maintain going? And are we maybe in for a FTSE 100 golden age?
New developments
Earlier than I get into issues, I’ll say that the not too long ago erupted battle in Iran has taken a dent to the FTSE 100’s latest features. The tumult might undo all that good work, or it might merely be a short lived blip. Due to the uncertainty of those type of geopolitical occasions, I’m going to depart dialogue of it out. Anyway…
The nice run of the final two years will be defined very merely: buyers just like the look of the FTSE 100 extra. Its outdated financial system shares – typically disparagingly known as dinosaur shares – mixed with massive dividends is trying enticing on this courageous new world of synthetic intelligence.
One neologism to concentrate on is HALO or ‘Heavy Assets Low Obsolescence’. These HALO shares are, because the identify suggests, unlikely to be consigned to the dustbin of historical past by AI and possess substantial precious belongings.
The FTSE 100 is strongly weighted with HALO shares like banks and miners. Conversely, the few tech shares that may go out of date like Rightmove or RELX are those dragging down the index of late.
There isn’t a assure both means that this pattern will proceed. But when the developments in AI proceed apace, then I wouldn’t be shocked to see extra FTSE 100 outperformance within the years to return.
Double-edged
One inventory that matches the HALO standards is Anglo-American (LSE: AAL). The mining large is unlikely to have its lunch eaten by advances in synthetic intelligence, and certainly new applied sciences and their demand for metals would possibly spur the corporate ahead within the years forward.
Mining is a cyclical sector. A lot of a agency’s success comes right down to the ever-changing costs of its commodities. And plenty of observers are predicting copper to be in demand over the subsequent decade. Anglo-American books round half of its earnings from the steel. This has contributed to a share worth that’s up 60% within the final 12 months.
It is a double-edged sword, nonetheless. Copper appears to be like scorching now, partly due to its position in inexperienced applied sciences like photo voltaic panels or electrical wiring. However who is aware of what the long run holds? Decreasing demand for copper would have the alternative impact.
The final phrase? Nobody can say whether or not this sturdy FTSE 100 runup is a quick episode or an indication of issues to return. However the index is full of these sorts of HALO shares that aren’t going wherever. I believe Anglo-American is one that’s price contemplating.
