Compared to the sort of gains delivered by the tech titans across the pond, one could be forgiven for thinking that FTSE shares have been a losing bet in 2024.
I don’t think that’s the case at all. I’d also say there are a few reasons for investors to consider prioritising these shores going into 2025.
Super year for stocks
OK, let’s be real. Few Fools would suggest not investing in US stocks like Nvidia and Tesla if they could turn back time. Both have delivered magnificent returns in 2024.
Even an S&P 500 tracker is registering a gain of 24%. And this comes after yesterday’s (18 December) fall following concerns that the Federal Reserve could deliver fewer interest rate cuts in 2025 than first thought.
But there are also plenty of UK-listed shares that have done very well.
From the FTSE 100, there’s engine-maker Rolls-Royce and British Airways owner International Consolidated Airlines. Both have nearly doubled in value. That’s not exactly shabby considering all the political upheaval over the period.
In the FTSE 250, there’s trading platform provider CMC Markets (+140%) and review website Trustpilot (+118%). The fact that these are two very different businesses shows that winners aren’t all concentrated in one sector.
They also highlight just how profitable stock picking has the potential to be. The mid-cap index itself has managed just 4%,
On sale
While some of these may find it tricky to replicate this performance in 2025, there are others that I think still look great value relative to their quality.
One example that investors may want to ponder buying is premium spirits seller Diageo (LSE: DGE).
Now, 2024 has been a bit of a stinker for the company. A cost-of-living crisis has continued to play merry hell with sales in some parts of the world. There are also mounting concerns that a growing number of younger people simply aren’t interested in consuming alcohol. These things have conspired to bring the share price down by over 10%.
Longer-term holders have fared even worse. Since peaking in April 2022, it’s down almost 40%!
This strikes me as an overreaction. The world isn’t suddenly turning teetotal. Indeed, Guinness has become so popular recently that UK pubs are in danger of running out! And Diageo can always pivot to pushing its alcohol-free alternatives to health-conscious Gen Z.
Moreover, Diageo trades at a forward price-to-earnings (P/E) ratio of 18. That’s significantly lower than its five-year average (23). Good trading over the festive period could push analysts revise their projections.
Buy British?
Of course, no one knows if Diageo or stocks in general will shine in 2025. Perhaps they will. Perhaps all will have an awful year if the (expected) bounce in inflation proves stickier than thought. We simply can’t say for sure.
But we can be pretty confident in saying that the US has rarely been more highly-valued, at least when it comes to large-cap stocks. This could conceivably temper returns for a while, pushing cautious investors to diversify their money into cheaper developed markets.
And regardless of what happens in 2025, we can also say that, historically, indexes like the FTSE 100 have gone up and to the right, increasing the wealth of investors along the way.
For me, it’s those long-term returns that really matter.
