From Trump’s tariffs and potential China trade wars to interest rate cuts and record highs for gold, investors have had to navigate a tricky macro environment lately.
However, one market that’s been stealing the headlines in all of this is the FTSE 100.
The UK’s 100 biggest stocks have had a good start to 2025, reaching record high after record high.
This article isn’t personal advice. If you’re not sure an investment is right for you, seek advice. Past performance isn’t a guide to the future.
Why has the FTSE 100 been rising?
Like most markets, there’s never normally one exact reason – it tends to be a combination of things.
One of the biggest drivers of the FTSE 100 has been a falling pound and strengthening US dollar – that’s because so many of the companies in the index earn their money in dollars. A weaker economic outlook for the UK has hurt the pound, at the same time as Trump’s return to the White House has boosted the dollar.
The index strength is reflected across multiple sectors. Following a period of extreme unprecedented concentration in the US markets driven by the big tech names, investors have been looking to add breadth to their portfolios.
Investors can gain exposure to world class financial services providers, cutting edge pharmaceutical companies, and gold miners who are receiving a tailwind from the yellow metal’s revival.
For those who see opportunity in long-term growth drivers for new-build homes in the UK, there are also a number of names to evaluate.
What’s next and how to invest in the FTSE 100?
With valuations in the UK still looking fairly attractive compared to peers, there could well be room to run for the FTSE 100 and wider UK stock market. That’s attracted the gaze of competitors too with takeover activity at elevated levels. And there are some pretty attractive yields on offer for income investors.
If you’re looking for FTSE 100 stocks to invest in, we think it makes sense to focus on quality businesses that command reasonable valuations across a diverse choice of sectors.
Here are three names worthy of further consideration.
Remember, investments and any income from them will rise and fall in value, so you could get back less than you invest. Yields are variable and no income is ever guaranteed. Ratios also shouldn’t be looked at on their own.
Investing in an individual company isn’t right for everyone because if that company fails, you could lose your whole investment. If you cannot afford this, investing in a single company might not be right for you. You should make sure you understand the companies you’re investing in and their specific risks. You should also make sure any shares you own are part of a diversified portfolio.
GSK – under-rated pharma giant
GSK has a less demanding valuation and more attractive yield than many in its peer group.
Payouts to shareholders were further boosted by the launch of a £2bn share buyback after a decent set of annual results. The dividend is supported by solid cash generation which is also helping to bring down debt levels.
The valuation reflects a slower growth trajectory than some competitors, but also weakness in high-profile vaccine sales, and legal claims relating to legacy heartburn drug Zantac.
The company has set aside £1.5bn for future dispute settlements, which is an amount it can well afford. Vaccine headwinds should moderate later this year, although there can be no guarantee.
Beyond that, a strong development pipeline underpins a sales outlook to £40bn by 2031 compared to £31.4bn in 2024.
A key area for GSK is HIV treatments. The focus is shifting to long-acting innovation therapies. It’s these that have helped capture market share and drive double-digit growth for the category last year.
Sales of cancer medicines, although relatively small, are growing rapidly. There are strong growth drivers for existing products in the franchise, and an exciting research programme.
Looking ahead, strong execution of the growth strategy and clinical pipeline should be the key focus for shareholders.
So far so good, but remember, the drug approval process is long and expensive, with many treatments never seeing the light of day.
Legal & General – high yielder with growth to go for
Legal & General’s high single-digit yield is one of the highest the index has to offer and dividend payouts look well supported too.
Pension risk transfers (PRTs) are core to operations.
These see L&G take on responsibility for paying some or all of the pensions from a company's final salary pension scheme (often called bulk annuities). In return, the group receives a lump sum managed by the new Asset Management division.
This circular flow within the business means L&G can deliver strong margins on its bulk annuity business, which is a core benefit of the model.
The UK is the most mature global market, but L&G has its eyes set further afield.
A new partnership in the US means L&G can ditch its US protection business, which doesn’t quite align with the broader strategy, while retaining a strong foothold in the US PRT market.
There are many strings to L&G's bow, with bulk annuities at its core. We see the market staying healthy over the medium term.
Overall, the valuation doesn't look too demanding to us, but does reflect some key challenges.
The first is to deliver improved performance from the refreshed Asset Management division, which will carry some execution risk.
Persimmon – building the foundations for growth
Housebuilder Persimmon came into 2025 with some solid momentum. Completions of new homes grew 7% last year, more than analysts were expecting, which should help deliver pre-tax profit of around £390mn.
Doubts around the timing and direction of interest rate changes are one risk that could dent consumer confidence. But with houses typically priced more than 20% below the newbuild average, sales tend to be more resilient in times of uncertainty. A £1.1bn order-book provides further visibility for 2025.
Increasing revenues should counteract build-cost inflation and maintain margins. Persimmon’s in-house materials business also helps manage input costs.
Significant pent-up demand for homes in the UK remains unchanged. The new government’s reforming the national planning framework to help remove some of the roadblocks for builders is starting to have a positive impact. But it’ll likely be a while before these changes really move the dial for housebuilders.
Persimmon’s robust land bank is a key strength, and it should be a major beneficiary of easier planning policies when they arrive.
In the meantime, the 5% yield looks to be supported by a strong balance sheet. Remember yields aren’t a reliable indicator of future performance.
The valuation is still well below the long-run average, reflecting a weakening macro-economic outlook for the UK. It means investors need to be focused on the long-term opportunity.
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This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by London Stock Exchange Group. These estimates are not a reliable indicator of future performance. Past performance is not a guide to the future. Investments rise and fall in value so investors could make a loss. Yields are variable and not guaranteed.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.