The FTSE 100 Index has made a significant leap, surpassing the 10,000 points mark on January 2, 2026, following a rise above 9,500 points in October 2025. This milestone reflects a remarkable recovery from its pandemic low of approximately 5,000 points, showcasing the resilience of the index. The recent surge prompts a crucial question: Can the FTSE 100 maintain this level throughout the year, given the various economic challenges facing global markets?
To gain insights into potential future performance, I consulted ChatGPT, posing a straightforward question: “Will the FTSE 100 break above 10,000 points in 2026, and if so, why?” The response, derived from an analysis of forecasts from financial institutions such as JP Morgan and AJ Bell, suggested a target range between 10,500 and 10,700 by year-end. This projection aligns with the index’s historical compound annual growth rate of 3.6% over the past 25 years, indicating a logical growth trajectory.
Lessons from Historical Performance
Past performance can offer valuable insights, even though it does not guarantee future results. A notable comparison can be drawn with the City of London Investment Trust (LSE: CTY), which invests in the top 70-80 British stocks. This fund has a strong reputation among income investors, having increased its dividend for an impressive 59 consecutive years. With a current yield of 4.3% and an appealing price-to-earnings ratio of 7.6, it presents a compelling option for both income and value investors.
Historically, the City of London Investment Trust experienced a near doubling of its share price from 155p to 297p between 1996 and 1998. Many investors believed it would swiftly breach the 300p mark, but it took another eight years, until October 2006, to reach that threshold. In contrast, the trust has only increased by 30% in the past two years, with current market conditions echoing those of the late 1990s. During that period, central banks were lowering interest rates in response to financial shocks stemming from speculative investments in what was termed a “new paradigm” surrounding the internet.
Today, a similar concentration of market power exists, particularly in the realm of artificial intelligence. The top ten companies, including Nvidia, Apple, and Alphabet, now account for 45% of the S&P 500’s total value, raising concerns about the sustainability of such growth.
Impact on UK Investors
While US companies lead the charge in AI speculation, the impact on the UK market cannot be ignored. Many FTSE 100 companies, such as Unilever, AstraZeneca, and British American Tobacco, derive approximately 40%-45% of their revenues from the United States. If speculation surrounding AI leads to a downturn reminiscent of the dot-com crash, the FTSE 100 may struggle to maintain its momentum above the 10,000 point level this year. In such a scenario, the City of London Investment Trust could face challenges due to its exposure to US markets.
On a more positive note, the FTSE 100 also benefits from a robust portfolio of defensive stocks, including Tesco, National Grid, and GSK. For investors looking to mitigate volatility during potential downturns, these stocks may offer greater stability.
As the year unfolds, monitoring the performance of both the FTSE 100 and the broader economic landscape will be crucial for investors. Understanding the dynamics of market concentration and the influence of AI will play a vital role in shaping investment strategies for 2026 and beyond.
