Top-performing UK stocks and investments see record gains as FTSE 100 reaches new peak levels
UK Stock Market Gains Momentum: FTSE 100 Hits Record Highs
The UK stock market, particularly the FTSE 100, has been attracting significant attention from investors this year. This shift is driven by a variety of factors, including a valuation advantage over US markets, corporate takeover activity, currency effects, and strong earnings reports from multinational companies.
In mid-2025, the FTSE 100 hit record highs. This surge is largely due to global investors reallocating funds away from US dollar assets, resulting from Federal Reserve policy changes and a weaker greenback. This trend has increased interest in UK multinational companies that generate most of their revenues overseas, offering value and dividend income in dollars.
The decline of sterling in early 2025 has also played a role. The weakening of the pound has increased the value of foreign earnings when repatriated, benefiting the FTSE 100’s multinational constituents.
The FTSE 100's appeal extends beyond its attractive valuation. As a high-dividend yield market, it offers income-focused investors around 3.8-4.0% in yields. Additionally, strategic corporate activities like large share buybacks (£56.5 billion in 2024) support investor returns and help stabilize the index.
Strong corporate results have further contributed to positive sentiment. Key global tech names like Microsoft and Meta, as well as top performers such as Shell and Rolls-Royce, have reported sharp earnings. The FTSE 100's structure, with more than 80% of revenues coming from abroad, means domestic UK economic conditions have limited influence on performance.
The FTSE 100's gains in 2025 are also supported by its diverse portfolio. It is full of stocks that appeal to investors in times of uncertainty, including a wealth of defense contractors like Babcock, which has seen a 110% increase this year.
The top performing UK fund year-to-date is SVS Zeus Dynamic Opportunities, up 24.4%. This fund invests across all company sizes listed on the UK stock market. Ninety One UK Special Situations is the second top performer, up 20%.
Another notable performer is Fresnillo, a Mexican precious metals mining company, which has seen a staggering 139% increase so far this year.
In summary, the FTSE 100's gains in 2025 are propelled by global capital shifts favoring UK multinationals amid dollar weakness, currency benefits from a weaker sterling, high dividend income, strategic corporate activities like takeovers and buybacks, plus strong earnings across key sectors including energy, tech, spirits, and aerospace. The FTSE 100's return of 14.3% year-to-date, including dividends from a FTSE 100 tracker fund, is better than the S&P 500's return of 9.2% over the same period.
[1] Bloomberg, 2025 [2] FT, 2025 [3] Reuters, 2025 [4] City A.M., 2025 [5] Financial Times, 2025
- With the FTSE 100 generating high-dividend yields and offering attractive valuation compared to US markets, investors have been allocating funds towards UK multinationals, contributing to the stock market's momentum.
- The decline in the value of the pound and the strengthening of the US dollar have resulted in increased interest in gold, as it offers a hedge against currency fluctuations, making it an appealing investment for some.
- The weaker sterling has had a positive impact on UK multinational companies, as the earnings made abroad are worth more when repatriated, adding to the appeal of the FTSE 100.
- The sharp earnings reported by key global tech names like Microsoft and Meta, as well as top UK performers such as Shell and Rolls-Royce, have significantly contributed to the gains seen in the UK stock market, particularly the FTSE 100.
