NOTE 👋
Hey, Happy New Year, if it’s still not too late to say that still?!
I hope you’re not too snowed under if you’re in the UK today. We’ve had about 3-4 inches of snow where I am, but nothing like the 10-11 inches of snow which I’d heard forecasted on the radio before it all kicked off last night. Regardless I hope you’ve managed to WFH if you can and whack that heating on! 🥶
Anyway, enough about the weather, let’s talk investing…
MARKETS 📈
I’ve got to be honest, i’ve not been too optimistic about the UK stock market in recent times and based on recent reports, I’m not the only British person who hasn’t been too optimistic one British equities…
It’s been reported that the UK saw record outflows in 2025, yet during the last 12 months the FTSE100 comfortably outperformed the S&P500, especially on GBP denominated basis due to the weakening of the US dollar…
Past performance is no guarantee of future results.
Above is an interesting chart.
It compares the FTSE100 Index, and a S&P500 market tracking ETF denominated in GBP (which is the actual rate of return UK investors would get due to currency conversions).
And as you can see the FTSE100 in yellow the past 12 months has delivered returns of 21.3% to investors, versus the S&P500 in blue of just 7.5%.
I say just lightly, 7.5% return over a 12 month period is still pretty good all things considered, still comfortably above inflation which is the benchmark for growing real wealth, but nowhere near the returns that the FTSE100 has provided.
But why now the sudden surge in UK equities and could this be a sign for a brighter future ahead?
Well there are a many factors that could be pushing stock prices higher, lets talk about a few.
1) Bank of England Base Rate
The Bank of England base rate has been reducing in recent times, with the latest Monetary Policy Committee resulting in rates dropping to 3.75%, a 1.5% reduction from peak rates in 2024.
Why is this good?
Well with inflation also forecasted to come down to the 2% target by mid-2026, this could push rates even lower throughout the year. Which is typically a positive sign for stocks.
Cheaper borrowing stimulates growth, growth can generate profit, which results in higher returns for shareholders… in theory.
2) Banking Stocks Providing Momentum
It wasn’t all too long ago that the UK went through a period of extremely low interest rates, barely above 0% for a long period of time.
Bank stocks struggled during that time, post financial crisis and all that, but with rates now substantially higher than they have been, UK banks have been making A LOT more money.
Annoyingly I worked in Banking between 2017 - 2024, owned company shares, but had to sell them when I left, and missed out on about 75% worth of gains... ouch!
Anyway, for those of you who have been holding onto banking stocks in the past 18months, well kudos to you, you may have even outperformed the Mag 7…
Past performance is no guarantee of future results.
The question is, will this momentum continue.
I mean i’m not a liberty to say, but i’d be interested to hear your thoughts on all this which you can share by replying to this email (I respond to everyone!)
3) Overseas Capital Investment
UK assets have been historically cheap and its made them attractive to foreign investors.
A report from the FT stated $142B of UK companies were acquired in 2025 by foreign bidders.
Perhaps we (British people) under appreciate the assets we have in the country, or perhaps foreign investors just appreciate the price of them more given they can likely get a bit more bang for their buck.
This is a loose analogy but I hope it lands well…
But it’s perhaps it’s like going to buy a brand new wallet.
You know you can get a good quality one from Next, or you could go designer and get one from Louis Vuitton.
The Louis Vuitton one will probably cost you 10x to 20x more (I don’t shop there so couldn’t tell you how much of premium they are), yet both are functional and are ultimately a safe place to store your bank cards.
And perhaps UK assets being “cheap” right now is providing interest for foreign investors, given they don’t want to pay “Louis Vuitton prices”, like they would from investing their money in other markets.
Who knows, but I hope this appetite continues and can fuel much needed growth in the UK. I just hope we don’t end up being “owned” by foreign investors because that probably doesn’t have the countries best interests in mind over the long term.
Perhaps another topic for another day…
Lots of ifs, buts and maybe’s I know, but do let me know if you find this kind of insight and analysis useful!
A SMALL FAVOUR ❤️
I’ve recently been making short form content, one of my goals for the New Year is to increase my output in 2026.
1 YouTube video a week probably isn’t enough as it stands! So i’ve ventured back onto my dormant Instagram account which fun fact was my first ever personal finance content creation venture back in 2017, but got abandoned back in 2020 when I started on YouTube.
If you enjoy a binge watching a bit of high value, research-led, educational short form content, then be sure to drop me a follow here.
Thanks so much!
VIDEO OF THE WEEK 🎬
Have a question? Want to discuss another topic? Provide some feedback? Please don’t hesitate to reply to this email, I promise I will get back you.
Have a great weekend.
Mitch 👊
