Picture supply: Getty Photographs
Over the long run, the US S&P 500 index has carried out very effectively. It’s up 89% over the previous 5 years, in comparison with 51% for the UK’s FTSE 100 index.
However thus far in 2025, the British index has overwhelmed its US peer, rising 11% versus 8%. That may be a modest achievement – however it’s an outperformance all the identical.
On high of that, the S&P 500’s dividend yield of 1.2% pales compared to the three.3% at present supplied by the Footsie.
So, can the FTSE 100 carry on doing higher than its US counterpart?
I’m nonetheless bullish on the FTSE 100
The FTSE 100 has been doing effectively – certainly, this 12 months has seen it hit a number of new all-time highs.
But it surely continues to look cheaper than the S&P 500, buying and selling on a decrease price-to-earnings ratio.
Then once more, in some methods the long-term progress prospects look much less thrilling, probably justifying that greater valuation for the S&P 500. Whereas the entire US index’s 5 largest corporations by market capitalisation are tech giants, not one of many FTSE 100’s 5 are.
That helps clarify the stronger efficiency of the British index thus far this 12 months, as some tech shares Stateside have suffered from an unsure enterprise atmosphere within the context of AI, mixed with already excessive valuations. But it surely additionally raises a query of the place a long-term growth-focused investor would possibly wish to look.
Nonetheless, I proceed to see the FTSE 100 as providing probably good worth. It may hold performing strongly even on a relative foundation, relying on what tech sector outcomes and investor confidence imply for the S&P 500 in coming months.
I’m shopping for particular person shares
However that doesn’t imply I’m ploughing spare money right into a FTSE 100 tracker fund.
Whereas I believe the index may probably transfer additional upwards, I’m selecting to put money into particular person shares fairly than shopping for the index.
That’s as a result of I believe there are some potential bargains but in addition seemingly overpriced shares within the FTSE 100. So, I choose to give attention to particular person shares I see as potential bargains.
Did I make a mistake?
Up to now this 12 months that method has been delivering combined outcomes.
For instance, I purchased into advert big WPP (LSE: WPP) after nervousness about its enterprise efficiency led its share worth to fall. A key threat is that AI will substitute massive elements of what the promoting trade does, hurting revenues and earnings.
WPP’s interim outcomes in the present day (7 August) supplied little or no consolation. The interim dividend was halved and the share worth fell to a 16-year low.
So, is that this FTSE 100 a worth lure even now?
It could possibly be, if AI actually does decimate its enterprise. However I’ve doubts on that rating – I believe the corporate’s consumer relationships, huge artistic workforce and lengthy expertise in promoting are all aggressive benefits that will assist defend lots of what it does from AI.
On that foundation, I believe that the share continues to look probably low-cost from a long-term perspective regardless of the dangers and haven’t any plans to promote.
