Why does the FTSE 100 keep outperforming the S&P 500?

In turbulent economic times, the defensive nature of companies on the FTSE 100 can be highly attractive to investors looking for safe passive income. The last year or two might have been the beginning of a sea change in this regard, with 2025 going down as a banner year for the Footsie. London’s leading index bagged a 21% return (with dividends on top!), even outgunning the AI-heavy S&P 500. It’s 5% ahead of it so far in 2026 too.

With many believing that more economic bad weather might be forming on the horizon, is the FTSE 100 at the start of a long bull run? And what stocks might boom over the coming years?

In the pocket

If I had to sum up the state of the FTSE 100 in just a few words, I’d probably go with high dividends, globally diversified, low valuations, and ‘old economy’ sectors. Each of the four characteristics is something of a double-edged sword.

The high dividends are terrific for those who prefer the cash in the pocket. But using the cash for investing in the company or buybacks can be better for share price growth.

Its global reach makes it less subject to any issues localised to the UK. But it does mean a lot of focus is on big economies like the US and China.

Low valuations like the price-to-earnings ratio are signs that companies are undervalued, but they are also signs of poor growth prospects.

And the more traditional sectors like defence, banking, and mining are not going anywhere. But a lack of focus on tech has been a real hindrance in recent years – and the primary reason why the S&P 500 has been superior for the last decade.

Taken altogether, there’s plenty of reason to think the last 10 years of weak performance could be a blip rather than the norm.

Resurgence

What if the FTSE 100 keeps beating the S&P 500? What stocks might be leading the vanguard? I think miners like Rio Tinto (LSE: RIO) are worth consideration in this regard. We’re already seeing a resurgence in the sector and I can see it continuing.

The stock pays a solid dividend of 3.95%. The share price is up 43% in the last year. And a price-to-earnings ratio of 13 is below the index average.

Demand looks like it should be strong in the medium term too. Rio Tinto’s metals and minerals like aluminium, lithium, and copper are all key metals in the manufacture of low carbon energy. Its biggest product of iron ore is vital in electricity infrastructure too.

A risk is that the firm’s health is tied to the global economy. If a downturn comes then there would be less demand for its raw materials.

It remains to be seen just how long-lasting this FTSE 100 golden spell will be. But I see no reason why the properties of Footsie stocks like Rio Tinto will not remain valuable to investors in the years to come.