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The FTSE 100 breezed effortlessly above 10,600 for the first time today (18 February). As I write mid-morning, it’s up 1.1% to 10,670, boosted by miners, banks and BAE Systems (+3.6%).
Just as in 2025, the blue-chip index is beating the S&P 500 so far this year. In fact, the difference is stark, with the US index down 0.5% year to date while the Footsie is up more than 7%.
It would only take another 3.1% rise reach 11,000 points. Given the powerful momentum here, I would be surprised if the FTSE 100 isn’t above that before the World Cup this summer.
Might 12,000 even be on the cards by the end of 2026?
Rate cuts ahoy
The news boosting the index today was that inflation had fallen to 3% in the year to January. The Office for National Statistics said this was helped by the cost of bread and petrol.
As a result, many economists now predict that interest rates will be cut to 3.5% next month. Rates could then be reduced twice again this year, bringing the figure down to 3%.
This would obviously be good news for inflation-weary consumers. And we can see this reflected in the domestic-focused FTSE 250 index, which is now at a four-year high.
Adding weight to the case for rate cuts is rising unemployment. At 5.2%, this is the highest rate in a decade outside the pandemic. So rates will likely be lowered to support the economy.
Things are getting weird
Another thing that’s happening is that things are quickly getting weird with AI. And as we know, uncertainty is the market’s worst enemy.
Last summer, I wrote that “AI is becoming so disruptive that it might get harder in future to successfully pick the ultimate big winners“. In other words, the technology lowers barriers to entry and potentially threatens the economic moats of many digital companies.
As such, a lot of investors are selling tech/software/data stocks and putting them into what the late Charlie Munger called the “too hard” bucket. Too hard, move on.
But when we look at the FTSE 100, it’s packed with firms that are at little risk of AI disruption. You can’t just ‘vibe-code’ a rival to Glencore, GSK or National Grid. These resilient businesses should even benefit from AI to drive efficiency.
Shares of Glencore, GSK and National Grid have all gained more than 20% in 2026. Tesco is up 20% in less than a month!
Is 12,000 realistic?
Rather than picking individual stocks, investors could consider the Vanguard FTSE 100 UCITS ETF (LSE:VUKG). This low-cost tracker fund reinvests dividends from Footsie stocks — collectively yielding 2.9% — to compound gains.
The top of the ETF mirrors the FTSE 100, with the largest five holdings being HSBC, AstraZeneca, Shell, Unilever, and Rolls-Royce. Obviously none of these are AI stocks.
The main risk with this fund is that investors suddenly shift from value back to Nasdaq growth stocks. But with AI spending and disruption fears reaching fever pitch, I don’t see that happening in 2026.
In fact, this FTSE 100 trend might have some way to go, especially with rates likely to fall. To rise another 12.5% to reach 12,000 might be a stretch too far, but I think 11,500 is definitely doable in 2026.
