The UK market hit another high yesterday, notching up a closing of 8,884 – the highest on record and 13 points above the previous top of 8,871 set on 3 March this year.
Index heavyweights Shell, BP, GSK and AstraZeneca nudged the blue-chips over the line on Thursday but this year it has been precious metal miners including Fresnillo, defence stocks Babcock, BAE and Rolls-Royce, and financials such as Lloyds and Prudential that have propelled the UK to new heights.
It means the domestic market (represented by the FTSE All Share) is now up 10.1% over the course of 2025, trouncing the 4.9% loss from the S&P 500 (in sterling terms) and better than every region apart from Europe, where the EuroStoxx index has gained 18.2%.
Even within this, the FTSE All Share’s year-to-date performance is better than the main CAC 40 in France, although it is behind the German Dax, which has rocketed so far this year on the government’s plans to splash the cash on defence and infrastructure.
It is also ahead of other large markets such as India, Japan and China, with some suggesting the home market is well and truly back.
Dan Coatsworth, investment analyst at AJ Bell, said: “The UK stock market has been a star performer this year… and is exactly what’s needed to help raise the UK market’s profile among international investors.”
So why has the FTSE All Share re-found its form after so long as the ugly duckling of the global market?
Neil Wilson, UK investor strategist at Saxo Markets, suggested a rotation in global equity markets as investors begun to question TINATA – there is no alternative to America.
“Investors are looking elsewhere and conversations with clients revolve around geographic diversification and reducing exposure to the US,” he said.
There are three tenets to this. First, the UK is offering some relative shelter with defensive names. Typically these also are undervalued relative to peers across the world (but particularly in the US).
Next, the UK is benefiting from flow dynamics as investors look beyond the US. While there are others also profiting, such as Germany, Wilson said the UK has “picked more than a few crumbs”.
Lastly is the dividend income yield, which the UK has been known for but has not been a key priority for investors in a world where artificial intelligence (AI) and the technology names in the sector have soared.
So will it continue?
The UK remains cheap. According to data from research firm Yardeni, the UK sits on a forward price-to-earnings (P/E) ratio of 12.6x, by far the lowest among global indices.
By comparison, the US is on 22x, Europe is on 14.5x and Japan is on 14.4x. The only market close to the UK’s figure is the much broader basket in the emerging markets, which are on 12.7x earnings.
Apologies for the statistics dump there, but it proves that despite reaching all-time highs the UK could have a lot further to run.
Whether investors feel the need to up their exposure to the home market is questionable, given they likely already have some overexposure to the UK relative to foreign investors. For those that don’t, it certainly doesn’t appear to be a bad idea.
And for those who continue to be overly exposed to the US, the data shows now is the time to at least reconsider the position, whether it be to the UK or elsewhere.