It’s no secret that US equities have outperformed their UK counterparts for several years now.
The UK’s main stock market index, the FTSE 100, has had a strong start to the year, soaring to new record highs and climbing 6.6% year-to-date. However, the S&P 500 has posted far stronger returns, climbing by 16.75% over the same period.
With this in mind, “it’s no wonder that investors have put their faith in North America to build their wealth,” says Dan Coatsworth, investment analyst at AJ Bell.
Sign up to Money Morning
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The US stock market index has also been climbing to record highs, largely driven by the outperformance of Big Tech firms, including the much-hyped chipmaker Nvidia.
One of the criticisms of the UK stock market has long been that it is under-exposed to technology companies, which have shown their ability to deliver stratospheric growth across the pond.
The London stock market enjoyed a bit of good news last month, when British microcomputer-maker Raspberry Pi went public with an initial public offering.
However, it comes against a tough backdrop for the London Stock Exchange, which has lost a string of companies to buyout activity in recent years. Recently, this has included AI and cybersecurity firm Darktrace, the top performer in the FTSE 100 year-to-date.
US versus UK equities: what are the top-performing stocks?
Data from AJ Bell reveals the top 10 stocks in the FTSE 100 and the S&P 500 so far this year. Several companies across the US and the UK have delivered glittering returns, outperforming the broader indices by some margin.
However, investors should remember not to be swayed by short-term movements. Before investing in a stock, you need to look at its long-term track record and its ability to deliver consistent returns.
Most people advise holding a stock for a minimum of three to five years to ride out any short-term volatility.
Nevertheless, year-to-date returns can be helpful in allowing us to identify some of the trends that are playing out right now – from the ongoing march of Big Tech, to the effect of persistently high interest rates, which have benefitted sectors like banking, energy and mining so far in 2024.
| Top 10 FTSE 100 stocks | YTD return | Top 10 S&P 500 stocks | YTD return |
|---|---|---|---|
| Darktrace | 57% | Super Micro Computer | 188% |
| Hargreaves Lansdown | 54% | Nvidia | 148% |
| Rolls-Royce | 52% | Vistra Energy | 123% |
| NatWest | 42% | Constellation Energy | 71% |
| DS Smith | 37% | Eli Lilly | 55% |
| Barclays | 36% | Micron Technology | 54% |
| Beazley | 36% | NRG Energy | 51% |
| Intermediate Capital | 30% | CrowdStrike | 50% |
| Vistry | 29% | Arista Networks | 49% |
| Anglo American | 27% | Targa Resources | 48% |
Source: AJ Bell, SharePad. Data 1 Jan to 28 June 2024.
What are the worst-performing stocks?
It hasn’t all been sunshine and roses, though, and there are some big names in the doldrums. Fans of luxury brands like Burberry and Lululemon will be disappointed to see their favourite labels appear in the bottom 10.
Makers of luxury goods have had a tough time recently, as consumers have made cutbacks thanks to the high cost of living.
Electric-vehicle manufacturer Tesla has staged a bit of a recovery in recent months, otherwise it could have been making an appearance in this table too. It’s another example of a firm that has suffered lower sales as consumers make cutbacks and switch to more affordable brands.
| Bottom 10 FTSE 100 stocks | YTD return | Bottom 10 S&P 500 stocks | YTD return |
|---|---|---|---|
| Burberry | -38% | Cooper Companies | -77% |
| Entain | -37% | Walgreens Alliance | -54% |
| JD Sports | -28% | Lululemon | -42% |
| B&M | -22% | Intel | -38% |
| Croda | -22% | EPAM Systems | -37% |
| Reckitt | -21% | Warner Bros Discovery | -35% |
| Spirax | -19% | Albermarle | -34% |
| Prudential | -19% | Globe Life | -33% |
| Whitbread | -19% | MarketAxess | -32% |
| Barratt Developments | -16% | Paycom Software | -31% |
Source: AJ Bell, SharePad. Data 1 Jan to 28 June 2024.
What key trends have emerged?
“There are five clear trends to explain the big movements on the UK and US stock market in the first half of the year,” says Coatsworth.
“They involve takeovers, AI, interest rates staying higher for longer, shifting fortunes in the fashion sector and lingering concerns around growth for certain companies,” he adds.
But with interest rate cuts on the horizon, we could see a shift in some of the sectors that are outperforming over the months to come. Some commentators have suggested housebuilders could see a boost once rates are cut – a development Barratt will certainly be hoping for.
There’s some suggestion that the UK general election could boost the housebuilding sector too, as both Labour and the Conservatives have committed to building more homes over the course of the next parliament.
Interest rate cuts tend to lift equity markets in general, by encouraging growth and boosting earnings. That said, some sectors like banks have done well while interest rates have been at a 16-year high, with favourable net interest margins boosting their profitability.
