The FTSE 250 has pushed through its 2021 peak to set fresh all-time highs in 2026, even as it remains significantly cheaper than its large-cap counterpart.
On a forward price-to-earnings basis, the FTSE 100 trades at around 18.1 times earnings, while the FTSE 250 sits closer to 15.3 times, representing roughly a 15% discount for the mid-cap index.
Some market commentators go further, noting that UK mid-cap stocks still trade well below their historical averages even after this year’s strong rally.
The two indices represent fundamentally different investment propositions, making the valuation gap more nuanced than a simple cheap-versus-expensive comparison.
The FTSE 100 is effectively a global portfolio listed in London, with around three-quarters of its revenue earned outside the UK, with its biggest weightings in financials, energy, and mining.
Buying into the large-cap index mostly means backing commodities, global growth, and dividend flows from multinational giants, with £88.8bn of expected dividends forecast in 2026.
The FTSE 250, by contrast, is far more a bet on Britain, with its constituents earning much more domestically and making the index more sensitive to UK interest rates, consumer spending, and housing.
The valuation gap between the two indices reflects their different risk profiles, with the FTSE 100 commanding a higher multiple as a defensive global cash generator.
Greggs (LSE: GRG) illustrates the mid-cap discount particularly well, with the bakery chain trading at 1,790p on a price-to-earnings ratio of just 13.9, below both index averages.
With a market cap of £1.8bn and shares up 6.7% year to date, Greggs also offers a dividend yield of 3.85%, adding further appeal for income-focused investors.
CEO Roisin Currie commented that “we made good progress in 2025, in a challenging year where subdued consumer confidence impacted the food-to-go market,” adding that “we enter 2026 with a strong pipeline of new opportunities to make Greggs even more convenient for customers.”
Greggs is precisely the kind of domestically exposed, consumer-facing business that stands to benefit if UK spending picks up, yet it still trades at a meaningful discount to where it stood a year ago.
The investment case for the FTSE 250 rests heavily on expectations for the UK domestic economy, with mid-caps having more room to move if interest rates fall or growth accelerates faster than expected.
If the global economy holds steady, the FTSE 100 can keep climbing on earnings and shareholder returns, making both indices credible options depending on an investor’s macro outlook.
The FTSE 250 is not automatically worth investing in just because it trades 15% more cheaply on a price-to-earnings basis, but for investors wanting to express a view on a UK economic recovery, it presents a compelling case.
