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In turbulent financial occasions, the defensive nature of firms on the FTSE 100 may be extremely engaging to buyers in search of protected passive revenue. The final yr or two might need been the start of a sea change on this regard, with 2025 happening as a banner yr for the Footsie. London’s main index bagged a 21% return (with dividends on prime!), even outgunning the AI-heavy S&P 500. It’s 5% forward of it to date in 2026 too.
With many believing that extra financial unhealthy climate could be forming on the horizon, is the FTSE 100 firstly of a protracted bull run? And what shares would possibly growth over the approaching years?
Within the pocket
If I needed to sum up the state of the FTSE 100 in only a few phrases, I’d in all probability go along with excessive dividends, globally diversified, low valuations, and ‘old economy’ sectors. Every of the 4 traits is one thing of a double-edged sword.
The excessive dividends are terrific for individuals who favor the money within the pocket. However utilizing the money for investing within the firm or buybacks may be higher for share value progress.
Its international attain makes it much less topic to any points localised to the UK. However it does imply lots of focus is on huge economies just like the US and China.
Low valuations just like the price-to-earnings ratio are indicators that firms are undervalued, however they’re additionally indicators of poor progress prospects.
And the extra conventional sectors like defence, banking, and mining should not going anyplace. However a scarcity of deal with tech has been an actual hindrance lately – and the first cause why the S&P 500 has been superior for the final decade.
Taken altogether, there’s loads of cause to suppose the final 10 years of weak efficiency could possibly be a blip quite than the norm.
Resurgence
What if the FTSE 100 retains beating the S&P 500? What shares could be main the vanguard? I feel miners like Rio Tinto (LSE: RIO) are value consideration on this regard. We’re already seeing a resurgence within the sector and I can see it persevering with.
The inventory pays a stable dividend of three.95%. The share value is up 43% within the final yr. And a price-to-earnings ratio of 13 is under the index common.
Demand appears to be like prefer it ought to be sturdy within the medium time period too. Rio Tinto’s metals and minerals like aluminium, lithium, and copper are all key metals within the manufacture of low carbon vitality. Its largest product of iron ore is significant in electrical energy infrastructure too.
A danger is that the agency’s well being is tied to the worldwide economic system. If a downturn comes then there could be much less demand for its uncooked supplies.
It stays to be seen simply how long-lasting this FTSE 100 golden spell shall be. However I see no cause why the properties of Footsie shares like Rio Tinto won’t stay helpful to buyers within the years to return.
