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The FTSE 250‘s carried out poorly for what looks like ages now. Even in 2025, when most indexes have surged 15%-20% (together with the FTSE 100), the mid-cap index has risen by round 8%, earlier than dividends.
Over the previous 5 years, the FTSE 250’s complete return has solely been round 34%. That’s not nice. However with the brand new 12 months practically upon us, would possibly 2026 be the FTSE 250’s time to shine?
What’s mistaken?
Not like the FTSE 100, the FTSE 250 incorporates a number of domestically-focused firms. Round half of income comes from these shores, making it extra of a barometer for the well being of the UK economic system.
Sadly, as we’re all conscious, the economic system’s flatlined for a very long time now, with very poor productiveness charges. We are able to argue until the cows come residence what the structural limitations stopping UK financial progress are. However in my view, stifling regulation and excessive taxes are two key contributing components.
The UK additionally has among the world’s highest vitality payments. So it’s extremely costly to fabricate issues right here and function companies, which is clearly having a damaging affect. Customers even have much less disposable earnings resulting from this.
Mix this with anaemic financial progress and it’s simple to see why the UK’s mid-cap share index continues to underwhelm. It is a disgrace as a result of there are some cracking firms within the FTSE 250.
One other factor holding the index again is the poor efficiency of funding trusts. They make up round a 3rd of the constituents however commerce at a mean 13% low cost to their underlying asset values.
What about 2026?
Given all this, I don’t see the FTSE 250 having a rip-roaring 2026. However decrease rates of interest may assist by boosting retail shares whereas additionally probably luring a refund into undervalued funding trusts. So if the UK economic system doesn’t weaken, I feel the FTSE 250 will rise in 2026.
At present, the index trades at 13 instances earnings versus round 18 for the FTSE 100. This means there are many undervalued mid-cap shares ready to be discovered.
Low cost shares
I feel Moonpig‘s (LSE:MOON) potentially one of them. The stock’s fallen 21% since June and 50%+ since itemizing in 2021.
Now round 200p, it’s buying and selling at simply 10.8 instances subsequent 12 months’s forecast earnings. My view is that that is low-cost for the UK’s main on-line greetings card firm, which has over 12m clients.
Crucially, Moonpig has an enormous database of 107m buyer event reminders (birthdays, anniversaries, and so forth). So it is aware of when a buyer wants to purchase a card and/or reward for somebody, which is extremely helpful for repeat gross sales.
In fact, the powerful UK retail market backdrop undoubtedly provides danger. However within the six months to the tip of October, income rose 6.7% to £169m, boosted by enlargement into Eire, Australia and the US. Abroad gross sales jumped greater than 32%, whereas earnings are rising by double digits.
In the meantime, extra clients are signing up for the Moonpig Plus subscription service, in addition to utilizing AI-generated stickers, audio and video messages. I’ve lately began utilizing the app myself (it saves me journeys to my native Tesco for playing cards!).
I feel Moonpig’s value contemplating. It’s only one of some FTSE 250 alternatives I see as we head into 2026.
