- The U.K. stock market remains much lower compared to U.S. and German indices.
- Since 2012, the FTSE 100 has underperformed, despite including large global companies.
- Many U.K. stocks offer higher dividend yields than major U.S. benchmarks.
- A wave of takeovers is expected to push up U.K. share prices.
- The falling U.S. dollar may increase demand for non-dollar assets like U.K. stocks.
The U.K. stock market is currently trading at significantly lower values than major global benchmarks, particularly the U.S. S&P 500 and Germany’s DAX. This trend has continued for more than a decade, drawing attention to the gap between the FTSE 100 and its peers.
Recent chart data highlights a persistent underperformance by the U.K. index when compared to both the U.S. and German markets. Most FTSE 100 companies are global businesses, yet the index stands at about half the value of American and German counterparts.
According to the article, “Whatever it is, something around 2012 broke whatever magic was keeping it in line with the U.S. and Germany.” The article also notes that this shift happened before the U.K.’s Brexit period, which started in 2016. The U.K. index yields dividends at approximately double the rate of the U.S. Dow Jones index.
A growing number of takeovers has started to push U.K. stock prices upward, and this trend is expected to accelerate. The source also highlights the likelihood of a decline in the U.S. dollar, which could boost the appeal of international assets not tied to dollar values.
The author points out that “cheap, dividend-paying, low P/E stocks – which are not denominated in a falling dollar – might suddenly look like the place to be.” A rise in liquidity is likely to target non-dollar assets, making U.K. equities a more attractive option for investors seeking value.
If the FTSE 100 breaks above 9,000, the article suggests investors should closely examine U.K. stocks. Many of these companies also offer American Depositary Receipts (ADRs), making them accessible to investors outside the U.K. The article concludes by calling the U.K. market one of the cheapest options currently available.
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