The S&P 500 has consistently outperformed the FTSE 100, delivering higher returns for investors.

S&P 500 vs FTSE 100 Performance

Over the past decade, the S&P 500 has averaged an annual return of 11.5%, while the FTSE 100 has only achieved 1.5%. If current trends continue, projections suggest that the S&P 500 will surpass the FTSE 100 in numerical terms by late 2028.

Sector Composition

The difference in performance can be attributed to the sector composition of the two indices. The S&P 500 is heavily weighted towards technology, with companies like Apple, Microsoft, and Amazon driving its success. In contrast, the FTSE 100 is dominated by traditional sectors such as finance, energy, and mining, which generally have lower growth prospects.

Economic Landscape

The economic landscape in the United States has been stronger than that of the United Kingdom, supported by robust consumer spending, business investment, and a culture of innovation. This has translated into significant corporate profit growth, making the S&P 500 more appealing to investors. The Federal Reserve's monetary policies, including quantitative easing, have also played a crucial role in supporting US equity valuations.

Currency Dynamics

Currency dynamics have further influenced the performance gap between the two markets, with the strong US dollar benefiting international investors in the S&P 500 and the weakness of the British pound sterling deterring foreign investment in the FTSE 100.

Investment Culture and Corporate Behavior

The investment culture and corporate behavior of the two indices also differ, with the FTSE 100 prioritizing dividend payments and the S&P 500 focusing on growth investment and share buybacks.

Political Stability and Investor Confidence

Brexit has introduced uncertainty and dampened investor confidence in UK stocks, while the relative political stability in the United States has maintained confidence in the S&P 500.

Future Outlook

Looking ahead, the S&P 500 is expected to continue outperforming the FTSE 100 due to its structural advantages and a more favorable economic environment. Investors should monitor economic policy, currency dynamics, and market sentiment as these factors can impact the relative performance of the two indices.