Investors have cheered the start of 2026, as the UK stock market has hit new record highs.
Britain’s leading stock market index, the FTSE 100, has begun the year on the front foot and climbed above the symbolic 10,000 points level.
Meanwhile, the leading US stock market index, the S&P 500, has also hit fresh highs.
But in keeping with recent times, the start of the year has also arrived with more political upheaval and geopolitical turmoil, while closer to home fears over the pace of Britain’s economic growth remain.
Rajan Lakhani, personal finance expert at Plum, says: ‘It’s been an eventful start to the year for investors. Geopolitics has continued to be a major factor in market performance, with the US and UK markets hit by President Trump’s threat of additional tariffs over the sovereignty of Greenland.
‘It’s yet again a timely reminder of not making a knee-jerk reaction to market movements and focusing on the long-term. With the President having followed through on his “TACO” moniker by rescinding the extra tariffs, the UK and US stock markets have once again climbed. It’s a clear lesson that markets don’t go up in a straight line so if the price of a share or fund goes down, it shouldn’t necessarily be seen as a reason to sell.
‘Some themes from 2025 appear to still be going strong, especially the ongoing rise of precious metals. Gold and silver investments continue to thrive, which comes as little surprise against such a volatile and uncertain backdrop.’
Can the strong start to 2026 be continued? We look at what’s happened in the year so far and what investors and savers need to know.
As with all investing, keep in mind, your capital is at risk and the value of your investments can go down as well as up. Past performance is not a reliable indicator of future results. This is not investment advice.
Stock markets have climbed at the start of 2026 but can that run continue?
Stock market
The UK’s flagship stock market index, the FTSE 100, has continued its strong run in the new year.
The FTSE 100 delivered a 24 per cent total return last year, beating the 17.9 per cent total return from the S&P 500.
A series of record highs were hit by the FTSE 100 last year and the index went tantalisingly close to breaking through the 10,000 points mark in December.
Investors had to exercise some patience but a close above that level was soon achieved in the new year, when the FTSE 100 closed at 10,005 points on Monday 5 January.
And the sparkling run continued. The FTSE 100 hit more highs in the weeks after and closed at 10,235 on Friday 16 January. Even though it slipped back slightly, on 27 January 2026 the FTSE 100 had climbed 2.59 per cent since the start of the year.
While a stock market bounce at the start of the year is no guarantee that shares will climb for the next 12 months, the FTSE 100 appears to be benefitting from a shift in investor sentiment.
Global investors have not favoured the UK stock market for some years, with it falling behind the US and other major peers. But there is a renewed interest in the Footsie’s large multinational companies, which generally trade at lower valuations than their American peers.
Over the past six months, miners, banks and defence stocks have dominated the top FTSE 100 performers.
The US stock market has also had a good start to the year, with the S&P 500 climbing 1.75 per cent since the beginning of 2026 by 27 January. However, investors remain concerned over the high valuations put on its big tech stocks and the robustness of the artificial intelligence-led boom.
Gold and silver have also had a barnstorming start to the year, continuing their strong 2025 performance. Gold has broken through the $5,000 mark for the first time and by 27 January was trading at $5,180. Silver has continued its astonishing rise, soaring 57 per cent from $71 at the start of the year to $112 on 27 January. Meanwhile, industrial metals tin and copper are also seeing their prices climb.
Investors are also worried by continuing geopolitical uncertainty, with US President Donald Trump having begun the year by sanctioning the abduction and arrest of Venezuela’s president Nicolas Maduro and agitating for control of Greenland, with the initial threat of new tariffs.
Meanwhile, fresh fears have been raised over the future independence of the US Federal Reserve, which sets interest rates, due to the Department of Justice’s criminal investigation into Chair Jerome Powell over multi-billion dollar renovations of its Washington headquarters.
The strong start shows how the year ahead could potentially be promising for investors, but events highlight how pitfalls remain.
Those concerned about market falls could seek to drip feed money into their investment accounts or make regular monthly investments. This allows them to continue to invest while limiting the risk of a sudden drop affecting a large lump sum paid in.
Plum’s investment app allows investors to regularly put money in and they can choose how to invest it across the different funds offered, including some that offer lower risk options.
Rajan added: ‘2026 is shaping up to be a supercharged version of 2025 with geopolitics remaining the central feature so lower risk options may be more digestible for some investors.
‘Trump is facing mid-term elections in the US this year, and polls suggest his Republican Party is set to lose control of the House of Representatives along with losses in the Senate. That will make it harder for him to avoid challenges on his executive orders, so it’s likely he’ll be even more active over the coming months before the elections, as demonstrated already by his threats over Greenland.
‘That said, the economic backdrop remains supportive for US equities, especially energy and industrial stocks, with AI momentum expected to continue backed by a mixture of monetary, fiscal and regulatory stimulus.
‘Trump’s recent actions have reinforced the importance of European states investing in their own security, and Europe’s defence sector has accordingly seen major gains in 2026 already. When combined with Germany’s plan to heavily invest in infrastructure and low interest rates, the potential rebound in corporate earnings could make European assets more enticing.
‘Meanwhile, the FTSE 100’s solid underpinning of miners, banks and insurers as well as defence companies means it’s well placed to continue its momentum.
‘There was one development that was particularly intriguing from the recent fallout over Greenland. Typically when there has been a major geopolitical event, investors have flocked to the dollar and US government bonds as they were perceived as the safest, most reliable and liquid parts of the financial system. But this time, the dollar and US Treasuries weakened, with investors seeking gold investments as a hedge instead.
‘That meant gold prices hit another fresh high in January, having already risen following the launch of a criminal investigation into Federal Reserve chair Jerome Powell, as well as demand from central banks, the dollar weakening further and concerns over debt sustainability, which is fuelling the ongoing debasement trade. This backdrop has led to gold once again becoming a “safe haven” asset where investors feel their money will at least hold in value or hopefully rise.
‘With long-term yields on Japanese Government bonds recently rising significantly, there could be even more pressure on bonds, including those issued by the US Government, as bond investors look to get a higher return on their investment.’
This is not investment advice.
Central banks are cutting rates but savings deals are holding up well
Savings rates
The Bank of England ended 2025 with an interest rate cut, taking the base rate down to 3.75 per cent at its December meeting.
The market consensus is that the rate-setting Monetary Policy Committee will cut rates another two times in 2026, but forecasts from individual economists vary.
The Bank of England targets 2 per cent inflation on the consumer prices index and although CPI is well above that – at 3.4 per cent in December according to ONS statistics released on 21 January – it is expected to continue to decline towards the target this year.
This gives the Bank room to cut base rate by more, but MPC members appear cautious and will be monitoring economic data carefully, particularly unemployment, wages and details in inflation.
December’s rate cut was the fourth in 2025, with base rate falling by an entire percentage point over the course of the year from 4.75 per cent to 3.75 per cent. However, December’s vote was close with a 5-4 split. Five members, including Bank of England Governor Andrew Bailey voted to reduce base rate, while four members wanted to keep it on hold.
Savers suffered a round of cuts after the base rate decision, but savings rates are still holding up well.
There are a raft of easy access and fixed rate deals that beat the base rate and the top cash Isa rates are comfortably above 4 per cent.
Plum’s cash Isa is one of the leading deals on the market and pays 4.32 per cent, including a 1.78 per cent bonus for 12 months, if kept for 12 consecutive months and other conditions are met. It has no restrictions on withdrawals and interest is tax-free.
The rate will fall to 2.54 per cent at the end of the initial 12-month period and this rate is paid on cash Isa transfers into the account too. The transfer-in rate is 2.54% AER (variable). Interest on our Cash Isa varies. This is the rate from 27/01/26.
Savers can ensure that they continue to benefit from the good rates on offer by making sure they do not leave money sitting in old accounts on lower rates. To make the most of their savings pot, they can shop around for the best rates.
Saving into a cash Isa also means that none of their interest is lost to tax. Above the £1,000 tax-free personal savings allowance, basic rate taxpayers have interest taxed at 20 per cent. But higher rate taxpayers get a personal savings allowance of just £500 and then get hit with 40 per cent tax.
Meanwhile, additional rate taxpayers have no tax-free savings allowance at all and would pay 45 per cent tax on savings interest.
