Best UK funds and stocks as the FTSE 100 reaches new heights

The FTSE 100 is reaching all-time highs, which is good news for investors These are the top-performing stocks and funds this year

There may be a reward for investors who have remained loyal to the best UK stocks and funds.

After breaking through the 9,000 barrier, the FTSE 100 reached record highs this month, and many shares and funds are profiting from its recovery.

With the SandP 500, Nasdaq, and Dow Jones dominating in the US amid the rise of the Magnificent 7, the UK stock market has lagged behind other nations in recent years.

However, there appears to be a recent surge in interest in more well-known brands, many of which are listed in the UK, due to new political and economic uncertainty.

Including dividends, investors would have received a total return of 14.3 percent from an FTSE 100 tracker fund so far this year, excluding fees.

That outperformed the 9 0.2 percent return of the S&P 500 during the same time frame.

According to Dan Coatsworth, an investment analyst at AJ Bell, "Investing in UK shares has been fantastic lately. As it has done several times this year, the FTSE 100 recently broke through the 9,000 mark for the first time.

What is the UK stock market's main driver?

People may find it difficult to accept that the financial markets are doing well in the UK due to worries about high inflation and tax increases.

However, given the uncertainties surrounding US President Donald Trump's trade tariffs and broader geopolitical tensions, the nation's relative political stability appears appealing.

Coatsworth adds that the FTSE 100 is overflowing with the kinds of stocks that investors find appealing in uncertain times.

Investors are looking for defensive companies, and the UK market is full of them," he said.

"Generally speaking, industries with consistent profits include telecoms, utilities, and tobacco. Some businesses are classified as non-discretionary spending, and they offer services that businesses and consumers require. Each month, we all have to pay our phone and energy bills.

In the context of rising government spending on sectors like cybersecurity and military forces, the UK stock market is home to a multitude of defense contractors that have drawn investor interest.

Another reason why investors are drawn to UK stocks, particularly from markets outside of the US, is valuation.

Additionally, Coatsworth stated: "When you consider common valuation metrics, American shares are pricey. For instance, the S&P 500 index trades at 22:02 times the earnings for the upcoming year. The index was on a significantly lower multiple between 2014 and 2020, trading between 14 and 18 times earnings.

On the other hand, the FTSE 100 is only trading at 12:6 times forward earnings. The UK market has seen a lot of takeovers lately, and as long as bidders are drawn to the valuation anomaly, this trend will continue in 2025.

Top stocks in the FTSE 100.

Stocks in the mining and defense industries have performed well this year thus far.

Babcock, a defense company, is up 110 percent, while Fresnillo, a Mexican precious metals mining company, is up 139 percent.

"Gold is frequently popular with investors during periods of uncertainty, such as heightened geopolitical tensions," Coatsworth continued. For precious metal miners like Fresnillo, whose shares have more than doubled in value since January, the price's recent record high has created a tailwind.

According to him, banks and insurance companies are well-liked because they consistently pay dividends.