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There is no shortage of doom and gloom surrounding Britain’s economic prospects. But you wouldn’t know that by looking at the performance of UK stocks.
Last year, for example, i FTSE 100 The UK’s leading share index rose by almost a fifth.
For a group of many long-established companies in mature industries, that’s an exciting performance in my opinion.
So, could 2026 be another vintage year?
The economy and the market are not the same
As we enter the year, there are many continuing reasons for concern.
The UK economy looks fragile, the country’s global risks remain high and there are signs of a slowdown in consumer spending in many markets.
Again, the same was true at this stage last year – and the FTSE 100 performed well. A weak economy does not necessarily cause a weak stock market, especially in the short to medium term.
On top of that, there are reasons to be optimistic about the next 12 months.
For example, pressure has been building over the past year to end Russia’s war in Ukraine. Some emerging markets are growing easily. The price volatility of last year may be a distant memory.
From a positive angle, 2026 is likely to be a good year for UK stocks.
Here is my investment plan for 2026!
Honestly, we just don’t know.
However, that does not change how I plan to invest in the stock market this year.
Every year, regardless of how well the broader stock market is doing, some individual companies do well while others do poorly even when the economy is high.
There is a difference between the performance of a stock market index and the performance of an individual share within it. That was true last year – and it will be true in 2026 as well.
That explains why, rather than buying an index (for example, by investing in an index tracker), I aim to hold a well-rounded, diversified portfolio of what I see as high-quality stocks bought at attractive prices. Some of the UK’s most popular stocks are part of that portfolio.
This year, I expect to continue doing the same thing.
Down, but out?
One of the UK stocks I bought last year using that method is the FTSE 100 brewer and distiller Diageo (LSE: DGE).
As someone who believes in the potential financial benefits of taking a long-term approach to investing, I plan to continue holding Diageo through 2026 and beyond.
It was a bad 2025. Now it has changed management, but that doesn’t mean it will be able to overcome the challenges it faces (and many of its competitors).
That includes weak consumer spending on luxury spirits today – and weakening trends in alcohol consumption over time. Both help explain why Diageo’s shares are falling in 2025.
But with its decades-long record of annual dividend growth per share, the UK share yielding 5% is attractive from an income perspective – if the dividend stays.
And with its strong product portfolio, global distribution muscle, highly profitable business model and unique, iconic production facilities, I remain optimistic about the outlook for the British drinks giant.
