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One thing mildly fascinating for buyers to digest: in 2025, the UK’s FTSE 100 index is up 18.8%, excluding dividends. In the meantime, its American cousin, the S&P 500 index, has recorded a 17% achieve. Moreover, the Footsie presents a dividend yield nearing 3.3% a 12 months, additional widening the efficiency hole between these two.
Then once more, this development is a reasonably latest phenomenon. Over 5 years, the S&P 500 has surged by 110.5%, versus a extra modest achieve of 74.1% for the FTSE 100 (each excluding money dividends). And because the international monetary disaster of 2007/09, the US index has completely thrashed its British counterpart.
Low-cost versus costly?
In fact, it’s troublesome to say precisely why this reversal has taken place between the world’s largest inventory market and its smaller compatriot. My principle is easy — and relies on one thing I’ve repeatedly argued in recent times.
These days, US shares have develop into nearly as costly as they’ve ever been, barring the height of the dotcom bubble that burst in spring 2000. In the meantime, the London inventory market appears to be like undervalued, each in historic and geographical phrases. Due to this fact, possibly some international buyers have been rotating out of costly US shares and into low cost UK shares. However who can say for positive?
Barclays beats Tesla
One British share that has achieved buyers proud in recent times is clearing financial institution Barclays (LSE: BARC). Although UK mortgage and enterprise lending has been subdued during the last two years, the Blue Eagle financial institution has seen vital boosts to revenues and earnings from its investment-banking operations.
As I write, the Barclays share value stands at 401.4p, valuing this nice British enterprise at £55.9bn. That is its highest market worth because the banking meltdown of 2008 and stands as a testomony to how far the financial institution has come since these dreadful days.
Over six months, Barclays inventory is up 36.1%, making it the eighth-best performer within the FTSE 100 over half a 12 months. This hovering inventory can also be up 66.2% over one 12 months and 277.2% over 5 years. Once more, these place it among the many Footsie’s prime shares over these intervals.
In distinction, shares in Elon Musk’s Tesla — the last word US meme inventory? — are up a mere 14.7% in 2025, versus 49.7% for Barclays shares. Over one 12 months, shares within the electric-vehicle maker have risen 76.5%, whereas they’ve shot up by 258.2% over 5 years.
In different phrases, no less than for a lot of the previous 5 years, boring outdated Barclays has been a greater wager for buyers than Elon’s go-go development firm. Wow, huh?
What subsequent?
As soon as once more, there is no such thing as a assure that this explicit development involving two extensively held shares will proceed. In any case, Barclays shares now commerce on nearly 10 instances trailing earnings — not significantly low cost for this share and for UK banks usually.
Additionally, Barclays’ dividend yield has dropped to 2.1% a 12 months — far decrease than when my household portfolio purchased this inventory for its money yield. For the report, we paid 154.5p a share in July 2022 and have reinvested all dividends into shopping for extra shares.
Lastly, though now we have no intention of promoting this FTSE 100 holding, Barclays shares have left my purchase checklist. I hope to search out higher worth elsewhere — however not in Tesla inventory buying and selling on a staggering 310 instances historic earnings!
