Does Brexit mean the S&P 500, Dow Jones and DAX are better growth options than the FTSE 100?

Should you ditch the FTSE 100 (INDEXFTSE: UKX) and its UK-listed companies in favour of those on the S&P 500 (INDEXSP: .INX), Dow Jones (INDEXDJX: DJI) and DAX (INDEXDB: DAX).

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Since the Brexit vote, many investors have understandably become nervous about the prospects for the UK economy. There’s a good chance the UK will experience at least some kind of economic slowdown which could spark a recession. Therefore, investing in UK-focused companies could become less appealing to UK-based investors.

As a result, they may be wondering whether it’s worth considering investing in other countries. For example, in the US via the Dow Jones (DJINDICES:DJI) or S&P 500 (SNPINDEX:GSPC), or in Germany via the DAX. Those two economies may not be about to endure a period of such great uncertainty as is the case for the UK. Therefore, domestically-focused companies could have superior near-term prospects compared to their British counterparts. And due to the US economy moving from strength to strength and the German economy continuing to benefit from a relatively weak euro, their prospects are rather bright.


Certainly, all three indices have outperformed the FTSE 100 (INDEXFTSE: UKX) in the last five years. While the UK’s index has risen by just 9%, the S&P 500 is up by 56%, the Dow Jones by 42% and the DAX by 31%. However, this could indicate that the FTSE 100 now offers better value for money than its three peers and that a buying opportunity exists in a post-Brexit  vote world as there are likely to be wider margins of safety on offer.

Clearly, the UK economic outlook is uncertain, but the reality is that the majority of FTSE 100 earnings are derived from outside of this country. This means it’s a truly international index and so its long-term performance may not differ all that much from the returns of its three peers. In an increasingly globalised world the four indices should in theory deliver similar levels of performance. Therefore, it could be argued that the bulk of the returns from the four indices should be broadly similar due to the major impact of global economic growth on their performance.

Diversified indexes

Of course, the Dow Jones is price-weighted, while the FTSE 100, S&P 500 and DAX are weighted by market capitalisation. This will give different performance in the same economic environment, while the DAX and Dow Jones have just 30 constituents apiece versus 100 and 500 for the FTSE 100 and S&P 500 as their names make clear. This means that the latter two are much more diversified and offer investors reduced company-specific risk. For many investors who are feeling somewhat nervous right now, this could prove to be a useful ally.

Meanwhile, the FTSE 100 has a far superior yield to its three international peers. It yields around 3.7% versus 2.5% for the DAX, 2.2% for the S&P 500 and 2.5% for the Dow Jones. At a time when interest rates in the UK are mooted for a fall in the coming months and the threat of inflation is lurking due to weaker sterling making imports more expensive, a higher yield could be a fillip for UK-based investors. A higher yield also indicates that the FTSE 100 offers better value for money.

So, while in recent years the FTSE 100 has underperformed versus the DAX, Dow Jones and S&P 500, as of the present time it seems to be the best option for long-term investors who are seeking to find the best stocks at the lowest prices.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

2 recession-resistant UK stocks I’d buy and hold for a decade!

Our writer details two UK stocks she believes could still continue to perform well in a recession and not feel…

Read more »

Back view of blue NIO EP9 electric vehicle
Investing Articles

Down 31% this year! Is now the moment to buy NIO stock?

NIO stock has moved sharply downwards in the past couple of months. Christopher Ruane likes the business potential -- but…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 dividend stocks I reckon could grow payouts for years to come!

This Fool is looking for dividend stocks and explains why these two picks could be primed to grow their payouts…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Should I buy, sell, or hold my Rolls-Royce shares at £3.50?

This Fool considers what he should do with his Rolls-Royce shares following the FTSE 100 company's excellent full-year results last…

Read more »

Couple working from home while daughter watches video on smartphone with headphones on
Investing Articles

With a spare £280, here’s how I’d start buying shares this March

Our writer reflects on what he has learnt on the stock market to explain how he would start buying shares…

Read more »

Businesswoman calculating finances in an office
Investing Articles

Are these expensive FTSE 100 stocks actually brilliant bargains?

Paul Summers takes a closer look at two FTSE 100 stocks that could recover strongly in time, despite already carrying…

Read more »

Investing Articles

What might the recent Aviva share price performance tell me as an investor?

Christopher Ruane looks at how the Aviva share price has performed over the past 12 months and considers whether he…

Read more »

Investing Articles

Down by a quarter, is the BT share price a steal?

The BT share price has more than halved in the past five years. What is holding it down -- and…

Read more »