\u201cmagnificent seven\u201d stocks<\/a>, higher valuations have been the principal driver, with dividends the smallest contributor.<\/p>\nLook over a shorter period, however, and the story is different. Over five years, again with income reinvested, the FTSE 100 has turned \u00a3100 into \u00a3177, only just shy of the \u00a3190 delivered by the S&P 500.<\/p>\n
That similar performance, despite the continuing popularity of US tech stocks, reflects a few different trends which continue to favour the UK.<\/p>\n
First, there has been a rotation from growth to value stocks, as rising interest rates have reduced the relative attraction of unproven future earnings and cash flows. Cash-generative UK stocks look more compelling when bond yields are higher.<\/p>\n
Second, the UK\u2019s exposure to commodities and energy shares has been a positive in an environment of higher natural resource prices. Third, banks (another big UK overweight) have benefited from higher interest rates, as have the UK\u2019s big dividend payers.<\/p>\n
Perhaps most importantly, however, investors have started to warm to the UK\u2019s much cheaper valuations.<\/p>\n
British shares are around a third cheaper than their US counterparts. While the gap has narrowed from nearly 50pc, that is still compelling. And a steady stream of takeovers (mainly from US and European companies) proves that corporate buyers are prepared to act if public markets will not assign the right value to listed companies.<\/p>\n
With this week\u2019s tech stock wobble once again pointing to the fragility of the AI-led bull market, investors are looking increasingly to pair capital preservation with a late-cycle search for capital gains.<\/p>\n
The UK clearly has a role to play in that kind of diversification. As and when the tech bubble starts to deflate, the relative resilience of old-economy stocks will appear increasingly attractive.<\/p>\n
The first decade after Brexit has been defined by a de-rating of UK assets. Ten years on, British shares are among the world\u2019s cheapest. If the uncertainty in Westminster starts to abate after this summer\u2019s changing of the guard, the appeal of UK shares will become even more apparent.<\/p>\n
Tom Stevenson is an investment director at Fidelity International. The views are his own.<\/p>\n","protected":false},"excerpt":{"rendered":"The US has a heavy weighting to the areas of the market investors want exposure to \u2013 technology,…\n","protected":false},"author":2,"featured_media":658451,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[84,5337,1294,935,2016,6884,221051,56,1893,54,55,4171],"class_list":["post-658450","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-comment","tag-economy","tag-european-union","tag-ftse-100","tag-opinion","tag-tom-stevenson","tag-uk","tag-uk-economy","tag-united-kingdom","tag-unitedkingdom","tag-us-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/658450","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=658450"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/658450\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/658451"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=658450"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=658450"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=658450"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}