Something mildly interesting for investors to digest: in 2025, the UK’s FTSE 100 index is up 18.8%, excluding dividends. Meanwhile, its American cousin, the S&P 500 index, has recorded a 17% gain. Furthermore, the Footsie offers a dividend yield nearing 3.3% a year, further widening the performance gap between these two.
Then again, this trend is a fairly recent phenomenon. Over five years, the S&P 500 has surged by 110.5%, versus a more modest gain of 74.1% for the FTSE 100 (both excluding cash dividends). And since the global financial crisis of 2007/09, the US index has absolutely thrashed its British counterpart.
Cheap versus expensive?
Of course, it’s difficult to say exactly why this reversal has taken place between the world’s largest stock market and its smaller compatriot. My theory is simple — and is based on something I’ve repeatedly argued in recent years.
Lately, US stocks have become almost as expensive as they’ve ever been, barring the peak of the dotcom bubble that burst in spring 2000. Meanwhile, the London stock market looks undervalued, both in historical and geographical terms. Therefore, maybe some global investors have been rotating out of expensive US stocks and into cheap UK shares. But who can say for sure?
Barclays beats Tesla
One British share that has done investors proud in recent years is clearing bank Barclays (LSE: BARC). Though UK mortgage and business lending has been subdued over the last two years, the Blue Eagle bank has seen significant boosts to revenues and profits from its investment-banking operations.
As I write, the Barclays share price stands at 401.4p, valuing this great British business at £55.9bn. This is its highest market value since the banking meltdown of 2008 and stands as a testament to how far the bank has come since those dreadful days.
Over six months, Barclays stock is up 36.1%, making it the eighth-best performer in the FTSE 100 over half a year. This soaring stock is also up 66.2% over one year and 277.2% over five years. Again, these place it among the Footsie’s top shares over these periods.
In contrast, shares in Elon Musk’s Tesla — the ultimate US meme stock? — are up a mere 14.7% in 2025, versus 49.7% for Barclays shares. Over one year, shares in the electric-vehicle maker have risen 76.5%, while they have shot up by 258.2% over five years.
In other words, at least for much of the past five years, boring old Barclays has been a better bet for investors than Elon’s go-go growth company. Wow, huh?
What next?
Once again, there is no guarantee that this particular trend involving two widely held stocks will continue. After all, Barclays shares now trade on almost 10 times trailing earnings — not particularly cheap for this share and for UK banks in general.
Also, Barclays’ dividend yield has dropped to 2.1% a year — far lower than when my family portfolio bought this stock for its cash yield. For the record, we paid 154.5p a share in July 2022 and have reinvested all dividends into buying more shares.
Finally, although we have no intention of selling this FTSE 100 holding, Barclays shares have left my buy list. I hope to find better value elsewhere — but not in Tesla stock trading on a staggering 310 times historic earnings!
