Yes, the S&P 500 has soared ahead of the FTSE All-Share, but beware its overstretched valuation ratios. It’s always best to get oﬀ the bull before it turns into a bear
For a long time, the US and UK stock markets were more or less joined at the hip. As the S&P 500 (the main US large-cap index) grew by more than 1,000% over the 20 years from 1980 to 2000, the UK’s FTSE All-Share followed along like an obedient puppy. And when the dot- com bubble burst in 2000, the FTSE All-Share matched the S&P 500’s 50% decline almost exactly.
After that, the UK and US economies boomed, thanks to low interest rates and a massive credit bubble. This helped both the S&P 500 and the FTSE All-Share double between 2003 and 2008. When the credit bubble inevitably burst in 2008, it drove both indices down by (again) almost 50% by early 2009. But thanks to massive banking bailouts, capitalism did not end – and the S&P 500 rallied to new highs, doubling between 2009 and 2013. The FTSE All-Share did the same.
So far so boring. However, the story becomes more interesting after 2013. Back then, several European countries (including Portugal, Italy, Greece and Spain) were going through a sovereign debt crisis, with governments unable to repay their debts without aid from other countries, the European Central Bank or the International Monetary Fund. One side eﬀect of this debt crisis was that the UK’s stock market recovery ran out of steam as global investors avoided European markets. This stopped the FTSE All-Share in its tracks: over the two years from May 2013 to May 2015 the All-Share increased by just5%. Meanwhile, the US remained largely unaﬀected by the eurozone crisis and the S&P 500 marched upwards, rising more than 25% over the same period.