UK Stocks and Investment Funds Reach Record Heights with FTSE 100
FTSE 100 Hits Record Highs Amid Global Economic Recovery
In 2025, the FTSE 100 has been on a remarkable journey, surpassing the 9,000 barrier and reaching record highs. This growth can be attributed to a confluence of favourable external economic conditions, strategic corporate events, currency effects, and strong UK corporate fundamentals.
One of the key drivers of this growth is the renewed demand in export-oriented sectors, supported by China's robust 5.3% economic growth. This demand has boosted the revenue of UK commodity producers and manufacturers, sectors heavily represented in the FTSE 100.
Improvements in US-EU trade relations have also increased optimism about global trade, benefiting multinational companies within the index. Capital flows are shifting away from the strong US dollar, making UK shares more attractive, especially undervalued blue-chip stocks, as international investors diversify to reduce currency risk.
Takeover activity in the UK has surged, driving up valuations by as much as 40% premiums in some cases. The depreciation of sterling, over 9% against the USD and euro in early 2025, has strengthened overseas earnings when converted back to pounds, directly benefiting FTSE 100 multinational firms. The FTSE 100 offers strong dividend yields, appealing to income-focused investors, providing resilience amid global uncertainty.
Robust corporate earnings exceeding market expectations have further fuelled investor confidence and supported the rally. Nearly half of the companies in the FTSE 100 have beaten the overall index year-to-date, but investors in funds have been able to outperform the market if they picked the right instruments.
One such fund is the SVS Zeus Dynamic Opportunities, which has a concentrated portfolio that includes stakes in defense and engineering groups Rolls-Royce and Chemring, airline EasyJet, supermarket chain Tesco, and precious metal miner Fresnillo. These industries have steady earnings and provide essential services that consumers and businesses need.
The top performing UK fund year-to-date is SVS Zeus Dynamic Opportunities, with a total return of 24.4%. The fund Ninety One UK Special Situations, which invests in airline Jet2, cigarette maker British American Tobacco, and defense contractor Rolls-Royce, among others, has also seen a total return of 20% so far this year.
The UK's relative political stability is seen as attractive compared to concerns in other countries, such as US trade tariffs and geopolitical tensions. This stability, combined with the attractive valuation of UK stocks, particularly compared to US markets, is drawing in investors.
Gold, a popular choice during periods of uncertainty, has seen its price hit a new record high this year, creating a tailwind for precious metal miners like Fresnillo. The FTSE 100 is filled with stocks that appeal to investors in times of uncertainty, such as those in tobacco, utilities, and telecoms industries.
The mining company Fresnillo has seen a total return of 139% so far this year, while the defense firm Babcock has seen a total return of 110%. The FTSE 100 tracker fund has provided a 14.3% total return year-to-date, including dividends, excluding charges.
In sum, the FTSE 100’s 2025 growth results from a confluence of favourable external economic conditions, strategic corporate events, currency effects, and underlying strong UK corporate fundamentals that distinguish it from peers like Germany’s DAX, which has experienced more volatility.
Investors looking for diversification amidst strong Gold prices are finding appeal in companies like Fresnillo, a precious metal miner in the FTSE 100. The increased optimism about global trade, resulting from improvements in US-EU relations and China's robust economic growth, has boosted multinational companies within the FTSE 100, making them more attractive for capital flows. Furthermore, the FTSE 100 offers strong dividend yields, particularly from companies like Tesco and Fresnillo, making it an attractive choice for income-focused investors.
