Has the US Market Peaked?

For more than a decade, US equities have dominated global stock market returns, with companies like Apple, Microsoft, and Amazon delivering exceptional gains. However, investors are now asking: Is it time to shift focus from the US to the UK?

At Fowler Drew, we use quantitative models to guide portfolio allocation, rather than following market narratives. Our latest analysis suggests that US equities may be overvalued relative to long-term historical trends, while UK equities appear underpriced.

Why the US May Be Losing Its Edge

1. Valuation Concerns

• US stocks have been trading well above their historical valuation trends.
• Price/Earnings (P/E) ratios are high by historical standards, making future returns less attractive.

2. Rising Interest Rates

• The Federal Reserve has tightened monetary policy, making equities less attractive relative to bonds.
• High-growth tech stocks, which thrive in a low-rate environment, have seen weaker performance.

3. Geopolitical and Economic Risks

• US-China tensions, regulatory challenges, and slower economic growth may weigh on future earnings.
• The US market is heavily concentrated in tech, making it more vulnerable to sector-specific downturns.

Why the UK is Attracting Attention

1. Cheap Valuations

• UK stocks trade at significant discounts compared to US equities.
• The FTSE 100 has lagged behind global indices, creating potential buying opportunities.

2. Stronger Dividend Yields

• UK companies tend to return more capital to shareholders through dividends.
• High dividend yields make UK stocks attractive in a low-growth environment.

3. Economic Stabilisation

• Despite Brexit-related volatility, the UK economy is showing resilience.
• A weaker pound makes UK stocks more attractive for international investors.