Both markets are near record highs

On 18 February, the Footsie rose 1.2% to end the day at 10,686 while the Dow also gained 0.3% to sit at 49,662. We can see the recent strong gains in both the iShares Dow Jones Industrial Average ETF (LSE: CIND) and iShares FTSE 100 UCITS ETF (LSE: ISF).

With both indexes rising, it’s tempting to compare them on a head-to-head basis. But I find looking just at the level of an index can be a distraction. The useful question is what investors are paying for earnings, and what they’re getting back in cash in both markets.

Valuation

On paper, there are big ticks for the Footsie over its US index counterpart. The Dow has a price-to-earnings (P/E) ratio of around 25 compared to the Footsie’s 19.5 as I write on 19 February.

That implies the Footsie trades at roughly a 20% discount on trailing earnings, and it’s a similar story on the income side.

The Footsie’s current dividend yield of 2.8% is comfortably ahead of the Dow’s, which tends to sit below 2%.

It’s worth noting that a higher yield doesn’t make one index necessarily better than the other. However, it often suggests a bigger slice of expected returns comes through cash payouts, not rapid earnings growth.

What’s driving the difference?

I think most of the valuation gap can be explained by the make up of each index.

The Footsie leans towards banks, energy, miners, and big, steady multinational companies in healthcare and consumer staples. Those areas can churn out cash and pay chunky dividends, but they’re not usually priced like high-growth stocks.

The Dow, meanwhile, is more of a ‘best of America’ shortlist. It blends big tech, including Microsoft, and healthcare with industrial heavyweights, consumer brands, and financials like Goldman Sachs. So the flavour is different. There’s more of the US growth story in the mix, even if it isn’t just a tech index.

It’s also worth separating the Dow from the wider US headlines. A lot of the excitement has been driven by the tech-focused ‘Magnificent 7’. That can pull valuations higher across the market, even when plenty of other US shares are just ticking along.

Finally, US companies have tended to return cash in a different way to their UK counterparts. Buybacks have often played a bigger role than dividends, which is one reason US indexes can look less generous on yield than the Footsie.

Key takeaways

The Footsie’s lower rating is mostly about sector mix. The large-cap index is more heavily weighted towards banks, energy, and miners, plus steady global earners in the consumer sector.

The Dow follows more of the US growth narrative and provides exposure to top US companies. Each index can provide strong diversification benefits to investors and I think there are great investment opportunities for investors to consider in both.

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Last year (2025) saw some of its top constituents record spectacular gains: Caterpillar up 59%, Goldman Sachs climbing 54%, and Johnson & Johnson gaining 44%. With less tech exposure than the S&P 500 or Nasdaq, it benefitted from a resurgence in domestic industrial and finance stocks.

As the tech-driven AI narrative appears increasingly speculative, this distinction is critical. Risk-averse investors looking for more stable, long-term exposure to US markets may find the Dow Jones a more appealing option.

Does the US market still offer good value?

US stocks still promise moderate growth potential but they’re not without risk. President Trump’s recent tariff threats regarding Greenland sent ripples through global markets, knocking the Dow down 2%. It’s recovered since he withdraw the threats but gold continues to surge as investors seek safe havens.

During these uncertain times, a moderate allocation into safe havens makes sense — but diversification remains key to spreading risk. Moving entirely out of stocks can result in lost gains if markets recover quicker than expected.

Overall, things still look productive for the US in 2026. GDP is forecast to rise 2%-2.6% and Fed funds are expected to stabilise around 3%-3.25% after measured cuts. On the flip side, there are risks from elevated valuations, tariff escalation, the debt ceiling, and political uncertainty around Trump’s Fed picks.

So what does this mean for UK investors — are US stocks still a buy amid all the volatility?

Why UK savers should still care about the Dow

For FTSE-focused Britons, the Dow still offers genuine diversification opportunities, which shouldn’t be ignored. While London loves miners and defence, America’s industrial heavyweights could offer an added buffer against the economic slowdown in China. In contrast to risky tech, the Dow offers ‘old economy’ large-cap plays that a retirement portfolio could benefit from.

Fortunately, British investors can gain exposure to it without investing abroad with the iShares Dow Jones Industrial Average ETF (LSE:CIND).

With a tiny 0.33% in total expense and £1.24bn in assets, it fully replicates the Dow Jones index. Top holdings include well-known megacorps like UnitedHealth, Microsoft and Visa. Plus, the accumulating version automatically reinvests dividends, which are tax-free in an ISA — good for compounding over 10 to 20 years.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Admittedly, the 1.8% yield is far from an income investor’s dream but still, it adds some value in the form of reliable returns. On top of that, the stock’s delivered a 71% five-year return, equating to around 11% per year on average.

My verdict

Even near record highs, I believe there’s still a lot of value to be found in the Dow Jones. Naturally, a key risk is its reliance on US political stability and economic strength. With the EU having mulled counter-measures to new US tariff threats, both regions are at risk of volatility in the coming months.

Still, for investors seeking a quick and easy way to gain exposure to the Dow Jones index, I think it’s a good option to consider. For those bearish on US markets, I’ve recently covered several FTSE 100 stocks that still offer excellent value, despite record highs.

The post Dow Jones near 50,000: is it too late to invest? appeared first on The Motley Fool UK.