The FTSE 100 indicator, the standard for the UK stock market, has been on a remarkable rally this time. So far in 2025, the blue-chip indicator has climbed by around 21%, banning tips.
That’s great news for British investors with money in FTSE 100 tracker funds or UK equity portfolios. But how does this strong performance stack up against the index’s long-term average returns?
The FTSE 100’s Average Return Over 20 Years
While up-to-date FTSE 100 historical data can be tricky to find, analysis of the last 20 calendar years — from 2005 to 2024 — shows that the total return, including dividends, sits at roughly 243%. That equates to an average annual return of around 6.4%.
In other words, 2025’s current performance is well above what the Footsie has typically delivered. If the index ends the year at these levels and dividends push the total gain to roughly 24%, that would be nearly four times higher than its two-decade annual average.
This highlights just how exceptional this year has been for UK stock market investors, particularly those with exposure to FTSE 100 shares or large-cap UK companies.
What Could Happen Next for the FTSE 100?
Now, a strong year doesn’t automatically mean that the following year will be poor. Markets can and do string together periods of solid growth.
However, with the FTSE 100 up more than 20% this year and nearly 10% last year, it wouldn’t be surprising to see more modest gains in 2026.
This could be a period of what investors call “mean reversion”, when returns naturally drift back toward their long-term average. Essentially, after two strong years, the market might take a breather.
Still, even if the FTSE 100 performance cools down, it doesn’t mean opportunity is gone. It simply suggests that the next phase could favour investors who are selective rather than those relying purely on passive funds.
A Shift Toward a Stock Picker’s Market
With the broader market running hot, the spotlight may now shift toward individual FTSE 100 stocks that have lagged behind the index but hold strong long-term potential.
This environment often becomes a stock picker’s market, where careful selection and timing matter more than simply tracking the index.
A FTSE 100 Stock Worth Watching
One FTSE 100 company that looks particularly intriguing right now is London Stock Exchange Group (LSE LSEG). The establishment is a leading global provider of fiscal data and analytics, feeding to banks, fund directors, and investment institutions worldwide.
Despite the strong request, LSE shares have slipped about 20% in 2025, leaving them trading at a forward P/ E ratio of around 20. For a data-driven software business, that looks like reasonable value.
What’s more, the company is investing heavily in AI-powered tools to enhance its financial data offerings, a move that could boost growth and potentially drive a re-rating of the stock. If that happens, a valuation closer to a P/E ratio of 25 or above could be achievable.
Analysts remain optimistic, too. The average critic price target for LSE is about £125 per share, which represents an upside eventuality of roughly 35% from current levels.
Of course, as with any investment, there’s no guarantee of success. However, the share price could remain restrained if the company’s earnings fail. But for investors looking for underrated FTSE 100 stocks, LSE might be one to keep an eye on.
The FTSE 100’s 21% rise in 2025 has been one of its strongest performances in recent times, a clear sign of renewed sanguinity in the UK stock market. Still, history reminds us that similar exceptional earnings frequently give way to calmer ages.
For investors, the crucial takeaway is balance. While FTSE 100 indicator finances have delivered freeheartedly this time, the coming months may reward those who dig deeper and identify individual UK stocks with solid fundamentals and growth eventuality.
In short, 2025 has been a stellar time for the FTSE 100, but the real occasion ahead could lie in picking the right UK shares for the coming stage of the trip.
