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After years of working relatively little S&P 500i FTSE 100 it finally has its day in the sun. In fact, it has made this many months in the sun because the UK blue-chip index has been strong for a long time now.
This is obviously good for UK investors, many of whom have their ISAs and SIPPs full of FTSE 100 stocks. But is this the Indian summer that will come to an end? Or have we entered a new financial climate altogether?
What’s going on?
So far in 2026, the FTSE 100 has gained 6.5% while the S&P 500 has sunk 0.9%. However, Footsie companies pay much higher dividends on average, and comparing those over the past five years, the two indexes are roughly equal in terms of return.
This is some volatility, although the US index is still a long-term winner, mainly due to large gains from technology stocks such as Microsoft, an apple, Broadcom, Nvidiaagain Tesla. The powerful digital revolution that has swept the world has created stock market juggernauts like corporate worlds.
However, after two-and-a-half years of the AI boom, investors are worried that these companies can really monetize the technology fast enough to justify their huge cash flows and figures.
As a result, money has been flowing out of Silicon Valley into ‘old economy’ stocks such as banks, utilities, oil majors, miners, and supermarkets. These pay dividends and trade at very cheap rates.
Of course, these are the very types of stock writers here The Motley Fool they have been fighting for years. They looked neglected for years and paid big dividends.
Furthermore, these non-tech companies are seen as AI-resistant. That is, they are ‘heavy, obsolete’ (HALO) companies that are protected from technological disruption.
Global investors are finally starting to wake up and see the light (HALO)!
Can it continue?
Of course, the stock market goes through cycles, so the cycle from growth to stock prices is nothing new. If investors move back towards higher growth stocks, the FTSE 100 may start to underperform again (at least relative to the S&P 500).
However, the rapid development of AI technology – especially with autonomous agents – continues to frustrate investors. So the FTSE 100 stock rotation still has legs, in my opinion.
Therefore, investors can consider something like iShares Core FTSE 100 UCITS ETF (LSE: CUKX). As we can see below, this index tracker has really taken off in the last few months.
This cumulative version of the ETF automatically reinvests any dividends paid by companies (such as A shell, Legal & Generalagain HSBC) back to the bag. Currently, the FTSE 100 offers a dividend yield of 3%, so reinvesting this alongside any share price gains helps the fund grow faster over time.
To my mind, there is a rock-solid mix of high-quality equities in the FTSE 100, from HSBC and Tesco to Aviva again The Admiral.
As mentioned, the FTSE 100 can always go out of fashion again. So I would only consider the Footsie index tracker as part of a diversified ISA portfolio that also had a few growth stocks in there.
