The FTSE 100, the index of Britain's largest listed companies, has breached the significant 10,000-point milestone, underscoring a robust upward trend and offering a note of cautious optimism for investors as the new year begins.
A Symbolic Surge Built on Solid Foundations
While crossing the 10,000 mark is largely symbolic, it highlights a remarkable period of growth for the London market. The index soared by 21.5% in 2025, marking its strongest annual performance since 2009. This surge comes despite persistent concerns about London's standing as a global financial hub, especially when compared to the tech-dominated markets of the United States.
The resilience of the FTSE 100 can be attributed to its unique composition. It is home to a robust blend of major international players in sectors that have prospered recently, including banking, mining, defence, and pharmaceuticals. Conversely, its notable lack of exposure to the stratospherically valued US tech giants has, in this instance, been a strength, offering investors a hedge against potential volatility in that sector.
The Sectors Powering the FTSE's Ascent
Several key industries have been the engines of this growth. Defence stocks, led by engineering powerhouse Rolls-Royce, have been buoyed by increased European defence spending commitments. The mining sector has also seen a powerful rally, driven by a flight to safe-haven assets like gold and strong demand for silver, a critical component in electrification technologies. Precious metals miner Fresnillo was the standout performer on the FTSE 100 in 2025, with its share price rocketing by more than 360%.
Banking and financial services enjoyed a stellar year, relieved by the absence of new tax-raising measures in the last budget. This contributed to massive gains for major lenders: Lloyds Banking Group rose 80%, while Standard Chartered and Prudential both climbed over 70%, and Barclays gained more than 60%.
Pharmaceutical giants AstraZeneca and GSK have also held firm. Their performance was supported by the recent UK-US pharmaceuticals deal, which promises increased NHS drugs spending, even though neither company currently markets a blockbuster GLP-1 weight-loss drug.
Cause for Optimism, But a Note of Caution
If these buoyant market valuations seem at odds with the challenges facing the domestic UK economy, it is crucial to remember the international nature of the FTSE 100. Constituents like HSBC, Anglo American, BAE Systems, Shell, Unilever, and AstraZeneca generate the vast majority of their revenue overseas.
The more UK-focused FTSE 250 index, which tracks the next largest tranche of British companies, tells a different story. It managed a gain of just 9% in 2025, highlighting a divergence between multinational corporate performance and domestic economic sentiment.
Nevertheless, a buoyant start to the trading year following a rewarding 2025 gives legitimate cause for investor optimism. With inflation and interest rates falling and forecast to continue doing so in 2026, a wager on improved economic sentiment may yet be rewarded.
