History was made on the first trading day of 2026 when the FTSE 100 index crossed 10,000 points for the first time in its 42-year existence. The milestone, achieved at approximately 8:30 a.m. London time on January 2, caps an extraordinary year for British equities that saw the UK's flagship index outperform even the mighty S&P 500.

Launched with a base value of 1,000 on January 3, 1984, the FTSE 100 has now completed a tenfold increase—a journey that took 15,371 days and survived multiple recessions, financial crises, Brexit, and a global pandemic.

2025: Britain's Best Year Since 2009

The FTSE 100 advanced more than 21% in 2025, recording its strongest annual performance since 2009 when the index rebounded from the depths of the global financial crisis. More remarkably, UK stocks outpaced their American counterparts: the S&P 500 gained 16% over the same period.

This outperformance inverts the narrative that has dominated markets for over a decade. Since 2010, U.S. stocks have consistently trounced their international peers, leading many investors to question whether any allocation outside American equities could be justified. Britain's 2025 performance suggests the tide may be turning.

"The FTSE 100's early rally above the 10,000 milestone is a powerful signal for UK markets," noted Axel Rudolph, analyst at IG. "It reflects ongoing confidence in earnings resilience, attractive valuations, and the growing appeal of UK equities to international investors at a time when policy headwinds are beginning to ease."

What Powered the Rally

Several factors combined to drive UK stocks higher in 2025:

Defense Stocks Soared: With geopolitical tensions elevated and European nations rushing to increase military spending, British defense contractors delivered extraordinary returns. Babcock International rose 146% in 2025, while Rolls-Royce gained 95%. BAE Systems added nearly 50%.

Banking Revival: UK banks benefited from stabilizing interest rates and improving loan demand. The sector had lagged for years but found its footing as fears of a severe recession faded.

Commodity Boom: The FTSE 100's heavy weighting toward natural resources companies proved advantageous. Gold and silver prices hit new records in 2025, lifting mining shares. Energy companies also contributed despite volatile oil prices.

Attractive Valuations: British stocks entered 2025 trading at significant discounts to their American peers. The so-called "UK discount"—partly attributed to Brexit uncertainty and political instability—began to narrow as international investors reconsidered the market.

The Speed of the Milestone

The journey from 9,000 to 10,000 took just 171 days—a testament to the market's momentum in the second half of 2025. For perspective, the previous thousand-point milestone (from 8,000 to 9,000) took considerably longer, achieved back in February 2023.

The fastest thousand-point gain in FTSE 100 history occurred during the late 1990s technology boom, when the index raced from 5,000 to 6,000 in just 229 days. The current acceleration suggests Britain is experiencing its most powerful bull market since that era.

Can the Rally Continue?

Bulls point to several factors supporting further gains:

  • Still-attractive valuations: Despite the rally, UK stocks trade at roughly a 20% discount to global peers on price-to-earnings measures.
  • Dividend appeal: The FTSE 100 offers a dividend yield exceeding 3.5%, significantly higher than the S&P 500's sub-1.5% yield.
  • Currency tailwinds: If the pound strengthens against the dollar, foreign investors in UK stocks benefit from both share price appreciation and currency gains.
  • Defense spending momentum: European rearmament programs worth hundreds of billions of euros should support UK defense contractors for years.

Bears counter with their own concerns:

  • Limited tech exposure: The FTSE 100 lacks the technology giants that have powered U.S. markets. If AI enthusiasm persists, Britain may underperform.
  • Domestic economic challenges: The UK economy remains sluggish, with high inflation having eroded consumer spending power.
  • Political uncertainty: A general election expected later in 2026 could inject fresh uncertainty into markets.

What It Means for Investors

The FTSE 100's breakthrough above 10,000 arrives at an interesting moment. After years of underperformance, UK stocks are finally attracting renewed interest from global allocators.

For U.S. investors, the question is whether to diversify into international markets after the S&P 500's exceptional run. The FTSE 100's strong showing in 2025 offers a compelling case: at lower valuations and with higher dividend yields, British stocks provide both value and income characteristics that are increasingly scarce in American equities.

The index's composition—heavy on financials, energy, mining, and defense—also offers diversification benefits. These "old economy" sectors have little overlap with the technology stocks that dominate U.S. portfolios.

The Bottom Line

The FTSE 100's arrival at 10,000 points marks more than a symbolic milestone. It reflects a genuine shift in performance, with UK stocks delivering returns that rival—and at times exceed—their American counterparts.

Whether this represents the beginning of a sustained rerating of British equities or a temporary phenomenon remains to be seen. But for now, the market that invented modern stock trading has given investors a reason to look beyond Wall Street. After 42 years, the FTSE 100 has finally hit five figures—and the celebration may be just beginning.