Picture supply: Getty Photos
With this yr nearly executed, 2026 has been very rewarding for traders. Main inventory markets — comparable to New York, London, and Tokyo — have surged to new heights this yr. Nevertheless, after 4 extremely worthwhile years, I’m apprehensive 2026 may very well be a poor yr for the UK’s FTSE 100, US S&P 500, and the like.
Fabulous FTSE
During the last six years, the excellent shares to personal for world traders have been US mega-cap tech shares. Shares within the so-called Magnificent Seven have surged to all-time highs, delivering many trillions of {dollars} of beneficial properties. Nevertheless, with US inventory markets buying and selling near document ranges, some concern this can be a bubble doomed to burst.
Nevertheless, what many individuals could not have seen is that the ‘boring, old-economy’ FTSE 100 index has completely thrashed the S&P 500 over the previous yr. The Footsie has leapt by 22.2% over 12 months, versus 14.4% for its American cousin.
Moreover, FTSE corporations typically pay beneficiant money dividends — the index’s dividend yield is hovering round 3.1% a yr. In the meantime, the present yearly money yield for the S&P 500 is simply over 1.1%. That’s one other couple of share factors within the UK index’s favour.
In sterling phrases, this hole is turns into a gulf, because of the pound rising towards the US greenback. For UK traders, the S&P 500’s whole return is simply 10.8% during the last 12 months — lower than half that of its British rival.
My household are delighted that UK shares have surged since 2024, as our portfolio contains round 25 FTSE 100 and FTSE 250 worth/dividend/earnings shares.
Bother in 2026?
When traders purchase belongings at sky-high costs, future returns usually undergo. Therefore, I’m apprehensive that subsequent yr is likely to be poor for the key US indexes (the S&P 500 and Nasdaq Composite). Alas, falling US markets would possible drag London down, as a result of “when New York sneezes, London catches cold” — as one outdated Metropolis saying goes.
In brief, I anticipate 2026 to be the FTSE 100’s worst yr since Covid-hit 2020, when the index returned -11.6%. As the longer term is inherently unsure, I received’t guess London’s returns subsequent yr. That stated, I’m satisfied they received’t match the galloping beneficial properties of the final 4 years.
Discount Bunzl?
As a worth investor, I typically rummage within the FTSE 100’s cut price bin for undervalued shares. Earlier, I noticed that certainly one of my household portfolio’s newest purchases is among the many Footsie’s worst performers this yr.
The index’s second-biggest loser in 2026 is bombed-out Bunzl (LSE: BNZL), whose shares collapsed on 15 April after poorly acquired outcomes. At its 52-week excessive on 13 February, this inventory briefly touched 3,488p. At their 2026 low on 17 December, the shares hit 2,050p, having collapsed greater than two-fifths (-41.2%).
On Friday, 19 December, Bunzl inventory closed at 2,094p, valuing this world distribution and outsourcing enterprise at simply £6.8bn. In the meantime, Bunzl’s plunging share value has decreased its valuation to 14.4 occasions trailing earnings. This delivers an incomes yield of 6.9%, thus the agency’s market-beating dividend yield of three.5% a yr is roofed nearly twice by historic earnings.
If world inventory markets do head south subsequent yr, then I anticipate Bunzl inventory to comply with swimsuit. But its conservative enterprise mannequin ought to flip this enterprise round over time, so we received’t promote our stake!
