This Market Beat U.S. Stocks This Year. The Case to Buy Into a 2026 Rally.

While the S&P 500 has gained 17% so far this year, it has been outstripped by an overseas index.

Key Points

• The FTSE 100 advanced nearly 20% this year, outperforming the S&P 500’s 17% gain, driven by corporate profits and cash returns.
• The UK market’s strong performance is notable given its limited exposure to technology stocks, unlike US and Asian markets.
• Analysts project continued growth for the FTSE 100, with AJ Bell forecasting a 9% gain to 10,750 points by the end of 2026.

On the back of a strong year for the S&P 500, investors may be forgiven for not looking beyond U.S. markets—but perhaps they should.

While the S&P 500 has gained 17% so far this year, across the pond in the U.K. London’s benchmark FTSE 100 posted a near 20% advance and is on track for its best year since 2009.

“The outperformance is striking, especially given the UK’s limited exposure to technology stocks, the main driver of U.S. and Asian stock markets in 2025,” Frédérique Carrier and others at RBC Wealth Management wrote in a note.

Indeed, while demand—and hype—linked to artificial intelligence (AI) propelled U.S. stocks higher this year, those trends are largely absent from London’s market. The FTSE is stacked with the likes of financials, healthcare, energy, and defense.

“The U.K. equity market has been carried by higher corporate profits and generous cash returns to shareholders, with a smattering of merger and acquisition activity on top,” Russ Mould, investment director at the brokerage AJ Bell , wrote in a note.

Created with Highcharts 9.0.1Source: FactSet

Created with Highcharts 9.0.1FTSE 100S&P 5002025Dec.-20-15-10-50510152025%

There is reason to believe this British bull market could keep going—albeit perhaps not with such outsize gains next year.

“Absent major changes to the UK’s fiscal policies, we think U.K. equities could continue to perform well. Valuations still look attractive to us despite the rally,” wrote the team at RBC.

AJ Bell, for its part, has an end-of-2026 price target on the FTSE 100 of 10,750 points. The benchmark was trading around 9,850 on Tuesday, implying an estimated gain of 9% across next year.

Consensus estimates collected by AJ Bell point to average forecasted profit growth of 14% among FTSE companies—in line with Wall Street’s expectations for earnings growth in the S&P 500.

While estimates for the S&P 500’s performance next year — Goldman Sachs sees a gain of 11% and Morgan Stanley 14%—outstrip AJ Bell’s forecasted 9% rise for the FTSE 100, there is still reason to buy the British benchmark.

“The FTSE 100’s profit and dividend mix by sector and by stock means it is a good play on both global growth and inflation,” Mould wrote. “It is packed by cyclicals, commodity plays and financials, with a bedrock of yield support from utilities and consumer staples underneath.”