The FTSE100 reaching 10,000 is more of a psychological milestone than a fundamental turning point. Nevertheless, it says a lot about the market situation. After years of lagging the US market, the UK blue chip index has benefited from easing inflation, falling interest rate expectations and a steady boost in risk appetite.

It is also worth remembering what the FTSE 100 index actually represents.

The index is dominated by global companies in energy, mining, consumer goods and finance, with most of their revenues generated abroad. Over time, a weaker pound, combined with resilient commodity prices and forceful cash generation, supported earnings growth even in the face of headwinds in the domestic economy.

This is not the only factor pushing the index up. Banks have been a huge driver of growth over the past two years. Banks currently represent the second, ninth, eleventh, fourteenth and eighteenth largest companies in the index.

For investors, moving to 10,000 doesn’t mean anything particularly noteworthy. Of course, this suggests that the wealth of people exposed to the index will boost accordingly.

Is the index still economical?

A recurring theme in recent years is that the FTSE 100 looks economical compared to US stocks. There were several reasons for this, many of them related to the UK’s weaker economic prospects and political uncertainty – even though around 70% of FTSE 100 revenues are generated abroad. One of the most critical and often overlooked factors is liquidity.

The US stock market is simply much more liquid. U.S. pension funds, ETFs and individual investors have been consistently funneling capital into domestic equities, creating deep pools of demand. British shares, meanwhile, faced continued outflows as pension schemes de-risked and global funds underweight London in favor of New York.

In brief, UK shares appear inexpensive compared to their US counterparts. Banks are the best example of this. However, there has been a significant change in the amount the market is willing to pay for UK companies. This should be viewed positively as a energetic capital market is good for almost everyone. Positive sentiment can even lead to more offers.

One to watch

What stocks should investors watch as we enter 2026?

I believe Melrose Industry (LSE:MRO) remains one of the most attractive and overlooked stocks in the index.

Through GKN Aerospace, the group is the exclusive Tier 1 supplier of key engine components and structural components to all major global manufacturers – a position that has been built over decades and is extremely arduous to replicate.

Currently, its technology is used in approximately 90% of lively commercial and military engines, and approximately 70% of revenues come from long-term contracts in which the company is the exclusive supplier. This gives you pricing power.

Still, the valuation remains modest. Shares are trading at around 15.1 times forward earnings, with a price-earnings-to-growth ratio of just 0.8. That’s a clear discount for peers like Rolls-Royce and GE AerospaceAND Saffron. The company also benefits from a energetic spare parts market, which ensures high revenues even during industry downturns.

The main risk is net debt of approximately £1.67 billion, but given its forceful cash generation and ambitious growth targets through 2029, I believe investors should consider Melrose Industries.