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I’ve been staring at two charts all week: one for the FTSE 100, down but still quietly hovering near record highs, and one for the FTSE 250, which has just pushed through its 2021 peak to set fresh all-time highs. On the surface, both look like winners in 2026. Dig a little deeper though, and the story splits in two.
Price tags that don’t tell the whole story
On a forward price-to-earnings (P/E) ratio basis, the Footsie trades at around 18.1 times earnings, while the FTSE 250 sits closer to 15.3 times, roughly a 15% discount for the mid-cap index. Some commentators go further, noting UK mid-cap stocks trade well below their historical averages even after this year’s rally.
| FTSE 100 | FTSE 250 | |
| Forward P/E ratio | ~18.1x | ~15.3x |
| Discount vs FTSE 100 | n.a. | 15.5% |
This isn’t simply a case of considering investing in the cheaper index. It’s a choice between two very different engines driving the UK market.
Two indices, two economies
The large-cap Footsie is effectively a global portfolio listed in London, with around three-quarters of its revenue earned outside the UK. Its biggest weightings sit in financials, energy, and mining. Buying it mostly means backing commodities, global growth, and dividend flows from multinational giants.
The FTSE 250, by contrast, is far more a bet on Britain. Its constituents earn much more domestically, making the index more sensitive to UK interest rates, consumer spending, and housing.
The valuation gap reflects different risk profiles: the Footsie commands a higher multiple as a defensive global cash generator, while the mid-cap index trades at a discount for its greater exposure to the UK cycle.
A FTSE 250 stock trading well below the index average
One name that illustrates this discount particularly well is Greggs (LSE: GRG). At 1,790p as I write on 10 September, the bakery chain trades on a P/E ratio of just 13.9, below both the indices two averages.
With a market cap of £1.8bn, the shares are up 6.7% year to date after a challenging period for shareholders.
We made good progress in 2025, in a challenging year where subdued consumer confidence impacted the food-to-go market. We enter 2026 with a strong pipeline of new opportunities to make Greggs even more convenient for customers.
CEO Roisin Currie
The dividend yield of 3.85% adds further appeal. Greggs is precisely the kind of domestically exposed, consumer-facing business that stands to benefit if UK spending picks up, yet it trades at a meaningful discount to where it stood a year ago.
Where I see the relative value
After the mid-cap index’s strong run in 2026, I still see a case for it as the better relative value play, with caveats:
- If the UK economy grows, or interest rates fall, faster than expected, domestic mid-caps have more room to move.
- If the global economy holds, the Footsie can keep climbing on earnings and shareholder returns, with £88.8bn of expected dividends forecast in 2026.
- Many FTSE 250 names still offer attractive individual yields.
My verdict
The FTSE 250 is not automatically worth investing in just because it trades 15% more cheaply on a P/E basis. But for investors wanting to express a view on a UK economic recovery, it’s worth considering some mid-cap stocks like Greggs among the many compelling stocks on the market right now.
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Ken Hall does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
