US and UK stock market valuations are now poles apart – The Property Chronicle
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US and UK stock market valuations are now poles apart

The Analyst

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 othe 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.

The Analyst

About John Kingham

John Kingham

John Kingham is the founder of, the membership website for sensible long-term dividend investors. John's approach to high yield, low risk investing is to buy quality dividend stocks when there is a significant margin of safety between price and fair value. John is also the author of The Defensive Value Investor: A Complete Step-By-Step Guide to Building a High Yield, Low Risk Share Portfolio. His website can be found at:

Articles by John Kingham

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