Over the previous yr, there was a marked distinction within the efficiency of the FTSE 100 versus the S&P 500. The previous is up by 9.5% over this era, with the latter up 19%. With UK traders like myself being able to simply purchase US shares from throughout the pond, ought to I allocate more cash to that space going ahead?

The case for doing so

One of many sectors that has led progress over the previous few years is expertise. Wanting ahead, synthetic intelligence (AI) is an offshoot of this space that’s prone to carry the baton of being the most popular theme for the approaching years.

After I have a look at firms which are on the forefront of this area, they’re a part of the S&P 500.

I personal shares in Apple (NASDAQ:AAPL), so agree that if I need to get correct publicity to tech, it is sensible for me to purchase these corporations, listed on the S&P 500.

Apple shares are up 22% over the previous yr, as the corporate continues to push ahead. On the worldwide builders convention it lately introduced a brand new wave of AI instruments that might be coming to the brand new iPhone and associated merchandise shortly. This reveals the way it’s capable of monetise AI and harness it in a sensible means.

The enterprise can also be interesting because of the steady money stream and continued income progress. The newest outcomes out from August confirmed Q2 income up 5% versus final yr. It’s additionally translating down to the underside line, with earnings per share of $1.40, up 11% from Q2 2023.

As a danger, the current ruling towards Alphabet on paying for search engine preferences isn’t a superb search for Apple. As extra data comes out, it might have reputational injury for each side.

As compared, the FTSE 100 isn’t recognized for tech corporations, and doesn’t have many shares that match the invoice in any respect.

The opposite facet of the coin

The large argument for the FTSE 100 is that it presents me a lot better worth than the US market. For instance, the price-to-earnings ratio of your complete index is 14.7. This compares to 27.92 for the S&P 500. The decrease the determine, the higher worth I’m getting as an investor.

A part of this is because of the truth that though there are some nice particular person firms listed within the UK, sentiment across the UK generally has negatively impacted funding. Components together with political uncertainty, Brexit, and a poor financial outlook have all had an affect. But that is unlikely to final without end, so I anticipate UK shares to have a interval within the limelight.

One other concern is that of a US recession this yr. After a disappointing payrolls report earlier in August, the unemployment price has risen to 4.3%. Some traders at the moment are anticipating the nation to enter a recession earlier than the tip of 2024. If realised, this might trigger the US markets to slip decrease.

The very best of each worlds

I personal each US and UK shares. Wanting ahead, I do assume I’ll make investments extra in S&P 500 shares, with a give attention to tech. Nonetheless, there are nonetheless loads of undervalued concepts from the FTSE 100 that I’ll goal to buy for the long run.