Large-cap UK shares have delivered some epic returns over the last 12 months. Even with stock prices pulling back in March, the FTSE 100 has climbed by 34%. And that number jumps to 37.6% for anyone who’s been reinvesting any dividends paid along the way.

In money terms, anyone who invested £5,000 in a simple low-cost FTSE 100 tracker fund a year ago now has £6,881.66 in the bank. But then the question becomes, how much money could investors make if they invest £5k today?

Here are the latest forecasts from the analyst team at UBS – including one stock they think could outperform in 2026.

1. Bull case: +7%

UBS’s most optimistic scenario projects the FTSE 100 index reaching 11,300 points by December this year. This stems from several assumptions, including easier financial conditions driven by further interest rate cuts, acceleration of growth across consumer spending, and elevated commodity prices.

2. Base case: flat

If market conditions remain steady with moderate economic growth and the geopolitical conflict in the Middle East doesn’t materially worsen, UBS expects sectors like tech, real estate, and industrials to outperform.

While higher energy costs do negatively impact the latter, this impact may ultimately be offset by structural trends such as higher defence spending and manufacturing reshoring. And in this scenario, UBS expects the FTSE 100 to reach 10,500 points – roughly where the index stands today.

3. Bear case: -32%

If the war in Iran escalates and energy infrastructure is targeted, triggering a massive surge in global oil & gas prices, the picture doesn’t look pretty for the FTSE 100. And the pressure on businesses would only be amplified by a slowdown or even a potential reversal of interest rate cuts.

In this scenario, UBS’s outlook is pretty dire, with the UK’s flagship index crumbling down to 7,200 points, essentially wiping out almost three years of stock market gains.

Which UK shares should I buy?

From a risk-to-reward perspective, this outlook suggests that now might be a good time to think defensively. By investing in mature businesses that thrive regardless of the economic landscape, a portfolio can be better protected in case disaster strikes.

So, it’s no wonder that Tesco (LSE:TSCO) is on the list of UBS’s highest-conviction picks right now. In fact, the supermarket giant seems to be in a unique position of benefiting from every scenario, even the worst case.

• Energy-driven inflation encourages consumers to trade down from restaurant spending to cooking at home.
• Its stable case flows limit the group’s sensitivity to interest rate shifts.
• A squeeze in consumer spending pushes shoppers towards Tesco’s own private label brands.

Having said that, this is far from a risk-free investment.

Prolonged elevated fertiliser costs risk a significant increase in food prices. Tesco may be forced to absorb all or some of these expenses to remain competitive with other discount retailers like Aldi and Lidl. And given the group’s already thin margins, even a slight reduction in profitability can have a disproportionate impact on the bottom line.

Nevertheless, this isn’t Tesco’s first rodeo. And with a long track record of navigating through tough economic conditions, investors may want to take a closer look at this enterprise, among other defensive UK shares, for their portfolios today.