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Over the long run, the US S&P 500 index has carried out very nicely. It’s up 89% over the previous 5 years, in comparison with 51% for the UK’s FTSE 100 index.
However up to now in 2025, the British index has crushed its US peer, rising 11% versus 8%. That may be a modest achievement – however it’s an outperformance all the identical.
On prime of that, the S&P 500’s dividend yield of 1.2% pales compared to the three.3% presently provided 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 nicely – certainly, this yr has seen it hit a number of new all-time highs.
Nevertheless it 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 development prospects look much less thrilling, probably justifying that increased valuation for the S&P 500. Whereas the entire US index’s 5 largest firms 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 up to now this yr, as some tech shares Stateside have suffered from an unsure enterprise atmosphere within the context of AI, mixed with already excessive valuations. Nevertheless it additionally raises a query of the place a long-term growth-focused investor may need to look.
Nonetheless, I proceed to see the FTSE 100 as providing probably good worth. It may preserve 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 spend money on particular person shares reasonably 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 concentrate on particular person shares I see as potential bargains.
Did I make a mistake?
To this point this yr that strategy has been delivering blended outcomes.
For instance, I purchased into advert large WPP (LSE: WPP) after nervousness about its enterprise efficiency led its share value to fall. A key danger is that AI will substitute massive elements of what the promoting business 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 value fell to a 16-year low.
So, is that this FTSE 100 a price 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 shopper relationships, huge inventive 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 don’t have any plans to promote.
