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UK shares have substantially underperformed their US counterparts over the long term. But recent data comparing the performances of FTSE 100 shares and S&P 500 stocks suggest the tide may be turning.
According to IG, the broader Footsie index has returned a healthy 28% to investors since July 2023. In doing so, it’s outperformed more than half (53%) of S&P businesses during the period, including the list of heavyweight US shares shown below:
| Share/Index | Two-year performance |
|---|---|
| Salesforce | 25% |
| Tesla | 18% |
| Apple | 11% |
| PayPal | 9% |
| McDonald’s | 6% |
| Airbnb | 5% |
| Chevron | 4% |
| Starbucks | -1% |
| FTSE 100 | 28% |
To Chris Beauchamp, chief market analyst at IG, the FTSE 100’s outperformance seems obvious.
He notes that “with tariff risks still present and US valuations looking stretched, it makes sense that investors should look for alternative developed markets in which to park their money. UK equities remain undervalued and under-owned despite their strong performance.”
Beauchamp adds that “the UK market offers exposure to global earnings, solid balance sheets, and valuations that remain relatively low by international standards.” Indeed, he believes the London stock market still provides “value to be unlocked“.
Bullish on US shares
US shares have been hit by a perfect storm in 2025. Fears that S&P 500 shares are overvalued have lingered for years. Amid uncertainty over US economic, trade and foreign policy, and a steady weakening of the dollar, it’s little wonder that Wall Street has lost momentum.
I think investors should still consider getting exposure to US stocks, however. Nvidia‘s surge to become the first $4trn company this month shows there’s still plenty of life on the other side of the Pond.
I myself continue to hold several index and thematic exchange-traded funds (ETFs) with heavy biases towards US shares. The US stock market has always recovered strongly from recessions, wars, pandemics and other crises.
And it remains packed with innovative, market-leading and financially robust businesses. I feel that it will keep delivering robust long-term returns for me.
A FTSE firework
Similarly, I think now’s also a good time to consider buying FTSE 100 shares. As IG notes, the blue-chip index remains packed with brilliant value opportunities.
Defence giant Babcock International (LSE:BAB) is one such UK share. It’s risen 290% in the last two years — only Rolls-Royce shares have risen by more. Yet at the current price of £10.50 it still looks cheap to me.
For this financial year, it trades on a price-to-earnings (P/E) ratio of 20 times. That’s below readings for Rolls (41.6 times), BAE Systems (25.5 times) and Chemring (28.7 times), to name just a few of its more expensive peers.
Babcock is still battling against supply chain issues in the defence industry and this remains a risk for it. But as a top-tier contractor to the UK’s Ministry of Defence, as well as major militaries abroad, I expect profits to grow rapidly as NATO rearmament grows. It’s also benefitting from work to turbocharge operating margins (these rose 2% last year, to 7.5%).
I think the defence star is a great stock to consider as part of a winning shares portfolio.
