Picture supply: Getty Photos
In turbulent financial occasions, the defensive nature of firms on the FTSE 100 will be extremely enticing to traders searching for protected passive earnings. The final yr or two might need been the start of a sea change on this regard, with 2025 taking place as a banner yr for the Footsie. London’s main index bagged a 21% return (with dividends on prime!), even outgunning the AI-heavy S&P 500. It’s 5% forward of it to this point in 2026 too.
With many believing that extra financial dangerous climate could be forming on the horizon, is the FTSE 100 at first of an extended bull run? And what shares would possibly increase over the approaching years?
Within the pocket
If I needed to sum up the state of the FTSE 100 in just some phrases, I’d most likely go together with excessive dividends, globally diversified, low valuations, and ‘outdated financial system’ sectors. Every of the 4 traits is one thing of a double-edged sword.
The excessive dividends are terrific for many who choose the money within the pocket. However utilizing the money for investing within the firm or buybacks will be higher for share worth development.
Its world attain makes it much less topic to any points localised to the UK. However it does imply a variety of focus is on massive economies just like the US and China.
Low valuations just like the price-to-earnings ratio are indicators that firms are undervalued, however they’re additionally indicators of poor development prospects.
And the extra conventional sectors like defence, banking, and mining aren’t going wherever. However a scarcity of give attention to tech has been an actual hindrance in recent times – and the first motive why the S&P 500 has been superior for the final decade.
Taken altogether, there’s loads of motive to suppose the final 10 years of weak efficiency might be a blip somewhat than the norm.
Resurgence
What if the FTSE 100 retains beating the S&P 500? What shares could be main the vanguard? I believe miners like Rio Tinto (LSE: RIO) are price consideration on this regard. We’re already seeing a resurgence within the sector and I can see it persevering with.
The inventory pays a stable dividend of three.95%. The share worth is up 43% within the final yr. And a price-to-earnings ratio of 13 is beneath the index common.
Demand appears to be like prefer it needs to be sturdy within the medium time period too. Rio Tinto’s metals and minerals like aluminium, lithium, and copper are all key metals within the manufacture of low carbon vitality. Its largest product of iron ore is important in electrical energy infrastructure too.
A threat is that the agency’s well being is tied to the worldwide financial system. If a downturn comes then there could be much less demand for its uncooked supplies.
It stays to be seen simply how long-lasting this FTSE 100 golden spell will probably be. However I see no motive why the properties of Footsie shares like Rio Tinto is not going to stay useful to traders within the years to return.
