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After years of underperformance versus the S&P 500, the FTSE 100 is lastly having its day within the solar. In actual fact, make that many months within the solar as a result of the UK’s blue-chip index has been robust for a while now.
That is clearly nice for UK buyers, lots of whom have their ISAs and SIPPs full of FTSE 100 shares. However is that this an Indian summer season that’s set to return to a frosty finish? Or have we entered a brand new monetary local weather altogether?
What’s occurring?
To this point in 2026, the FTSE 100 has gained 6.5% whereas the S&P 500 has dipped 0.9%. Nonetheless, Footsie firms pay far increased dividends on common, and once we issue these in over the previous 5 years, the 2 indexes are virtually stage on a complete return foundation.
That is some turnaround, although the US index continues to be the longer-term winner, primarily as a result of large good points from tech shares like Microsoft, Apple, Broadcom, Nvidia, and Tesla. The highly effective digital revolution that has swept the globe has created inventory market juggernauts akin to company nations.
Nonetheless, after two and a bit years of the AI growth, buyers are getting nervous about whether or not these firms can really monetise the expertise quick sufficient to justify their large capital outlays and valuations.
Consequently, cash has been transferring out of Silicon Valley and into ‘outdated economic system’ shares like banks, utilities, oil majors, miners, and supermarkets. These pay dividends and commerce at less expensive valuations.
After all, these are precisely the sorts of shares writers right here at The Motley Idiot have been championing for years. They’ve seemed essentially undervalued for ages and in addition paid beneficiant dividends.
Furthermore, these non-tech companies are seen as AI-resistant. That’s, they’re ‘heavy-asset, low-obsolescence’ (HALO) firms insulated from technological disruption.
World buyers are lastly beginning to get up and see the (HALO) mild!
Can it proceed?
After all, the inventory market goes in cycles, so rotations from development to worth shares is nothing new. If buyers flipped again in the direction of high-growth shares, the FTSE 100 might begin underperforming once more (at the least relative to the S&P 500).
Nonetheless, the fast growth of AI expertise — significantly with autonomous brokers — continues to spook buyers. So the rotation in the direction of FTSE 100 shares nonetheless has legs, for my part.
Due to this fact, buyers might think about one thing just like the iShares Core FTSE 100 UCITS ETF (LSE:CUKX). As we are able to see beneath, this index tracker has actually taken off over the previous few months.
This accumulating model of the ETF routinely reinvests any dividends paid by the businesses (like Shell, Authorized & Normal, and HSBC) again into the fund. At present, the FTSE 100 presents a 3% dividend yield, so reinvesting this alongside any share value good points helps the fund develop quicker over time.
To my thoughts, there’s a rock-solid mixture of high-quality dividend shares within the FTSE 100, starting from HSBC and Tesco to Aviva and Admiral.
As talked about, the FTSE 100 might at all times exit of style once more. So I might solely think about a Footsie index tracker as a part of a diversified ISA portfolio that additionally had just a few development shares in there.
