British investors have been increasingly turning their attention to the other side of the Atlantic and investing in US stocks in recent years.
With the US stock market putting in a stint of stellar performance, led by the so-called Magnificent Seven group of household name technology giants, that’s hardly surprising.
But if you dig deeper, how does the US stock market stack up against its UK counterpart and how does their recent performance compare?
With the help of investment platform Trading 212, we reveal its investors’ top five most bought stocks from the US and UK and take a look at both markets.
Nvidia has rocketed over recent years to become the second biggest US listed company
The US vs the UK stock market
The US stock market
The flagship of the US market is the S&P 500 index. This index of large companies has delivered two knock-out years on the bounce, with 2023’s 32 per cent total return followed by 2024’s 22 per cent return.
The S&P 500, was created in 1957 and includes 500 of America’s leading listed companies by size, covering about 80 per cent of the available US stock market capitalisation.
It is market cap weighted, which means the proportion of the index that a firm makes up relates to its overall size: the bigger a company’s overall value, the larger its slice of the index is.
Apple is currently the S&P 500’s largest company by market cap
The last major decline for the S&P 500 was seen in 2022, when in share price terms it dropped 15 per cent, although that followed a powerful 2021, when it leapt 31.5 per cent in the pandemic rebound.
Dividends make up only a relatively small portion of returns from the S&P 500, with the current yield just 1.24 per cent.
Over five years, the S&P 500 is up 84 per cent in share price terms. This robust growth has pushed the US market to an even greater proportion of the global stock market, making up about 74 per cent of the MSCI All World index.
The Magnificent Seven dominate the market, with Apple, Nvidia, Microsoft, Amazon, Meta, Tesla and Alphabet’s two share classes, joined only by Broadcom and Berkshire Hathaway in the top ten constituents.
This top ten accounts for 37 per cent of the whole S&P 500 index and the similarity of the companies in it, has led to concerns over concentration risk.
Information technology is the biggest sector in the S&P 500 at 32.5 per cent, followed by financials at 13.6 per cent and consumer discretionary at 11.3 per cent.
The other major US markets are the more limited Dow Jones Industrial Average, an index of 30 selected large US companies and the tech-heavy Nasdaq index of 3,500 companies.
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The UK stock market
The main UK stock market is covered by the FTSE All Share index, although the leading index of the hundred biggest companies, the FTSE 100, garners most of the headlines.
The FTSE All-Share covers brings together the FTSE 100 index, the mid-cap FTSE 250 market index and the FTSE Small Cap index, which account for 98 per cent of the UK stock market.
It does not include London’s AIM market of small and micro-cap shares.
Dating back to 1962, when it was called the FT Actuaries All-Share Index, the FTSE All-Share is a market cap weighted index. The FTSE 100 and FTSE 250, were created in 1984 and 1992, respectively, to allow for tracking large cap and mid-cap stocks.
BP ended 2024 as the FTSE All-Share’s sixth largest company by market capitalisation
The FTSE All-Share had a good 2024, with a 9.5 per cent total return. This followed another decent year in 2023, with a total return of 7.9 per cent. The UK market also narrowly avoided losses in 2022, when it was the best performing major global market with a 0.3 per cent total return.
A larger chunk of the FTSE All-Share’s returns are driven by dividends than the S&P 500’s, thanks to the UK market’s 3.59 per cent yield.
However, as with many major markets, the FTSE All-Share has been put in the shade by the S&P 500’s barnstorming returns. Over the five years to the end of 2024, the FTSE All-Share was up just 6.5 per cent in share price terms but delivered a total return of 27 per cent.
The ten largest stocks in the FTSE All-Share make up 38.9 per cent of the index but could be considered more diverse than the S&P 500’s top ten.
They are: Astrazeneca, Shell, HSBC, Unilever, RELX, BP, British American Tobacco, Diageo, London Stock Exchange Group, and GSK.
The biggest sector in the FTSE All-Share is financials, at 26.5 per cent, followed by consumer staples, at 14.8 per cent, and industrials at 11.9 per cent. Technology makes up just 1.4 per cent of the index.
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