1. General equity markets expected to continue growing
Most analysts see global equities delivering positive returns in 2026, building on strong gains in recent years. For example, Wall Street forecasts a modest rise in major U.S. indices, supported by corporate earnings growth, potential interest rate cuts, and resilient economic dynamics. However, risks such as elevated valuations and economic uncertainties could add volatility.
2. Macro drivers to watch
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Earnings growth remains a core driver of equity performance, with forecasts pointing to continued profit expansion next year.
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Monetary policy — central banks like the Federal Reserve and Bank of England are widely expected to ease interest rates, which typically supports risk assets like stocks.
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Artificial intelligence and tech investment are significant themes that could continue to underpin global market strength, particularly in the U.S. and broader developed markets.
Risks include high valuations (especially in growth and tech stocks), geopolitical tensions, and potential economic slowdowns.
FTSE 100 & UK Market Outlook for 2026
Bullish-to-Neutral Consensus
1. Growth supported by earnings and policy
Major banks and research houses forecast moderate earnings growth for UK companies in 2026. One report projects roughly 5% profit growth next year, with a neutral base case scenario for the FTSE 100 around 10,000 by year-end and an upside near 10,800 if conditions improve. Downside risks could see a lower outcome if global demand falters.
2. Monetary policy tailwinds
The Bank of England is expected to reduce interest rates gradually in 2026, which tends to support equity valuations, especially in sectors sensitive to borrowing costs like banks, housebuilders, and utilities.
3. Solid dividend yield
The FTSE 100 is forecast to provide a reasonable yield (~3.4%) in 2026 — reflecting continued income appeal for dividend-oriented investors.
Caveats & Bearish Views
1. Mixed performance scenarios
Not all forecasts are optimistic. Some analysts warn that the FTSE 100 could underperform in 2026 or even deliver negative returns — comparing potential weakness to the turbulent year of 2020.
2. UK economic headwinds
Domestic growth in the UK is expected to be modest, and slower local GDP expansion could dampen equity performance relative to global peers. External revenue from multinational FTSE 100 companies (most sell abroad) can cushion this to some extent.
3. Structural changes and market composition
Shifts in the FTSE 100’s makeup — for example fewer classic industrial conglomerates — may change how the index performs and how investors should think about sector exposures.
Key Themes for 2026 Investors
Bullish drivers
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Corporate earnings growth
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Interest rate declines by central banks
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Global diversification of FTSE 100 firms
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Dividend and buyback support
Potential risks
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Valuation risk in certain sectors
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UK domestic economic vulnerability
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Geopolitical and inflation pressures
Bottom Line
Global markets: Expected to deliver positive returns in 2026, supported by earnings and easing monetary conditions, although risks remain.
FTSE 100: Moderate growth or a neutral year is the consensus across many forecasts — with a meaningful possibility of reaching or exceeding 10,000, but also some downside risk scenarios. A blend of earnings resilience, strong dividends, and global revenue exposure are key supports for the index.