UK stock market bulls are optimistic about 2025, betting that low valuations and substantial shareholder dividends will boost the market. The FTSE 100 Index has risen 6% this year, though it trails the Euro Stoxx 50 and S&P 500 indices. Despite uncertainties like US trade policies under Donald Trump, inflation pressures, and potential reduced rate cuts in the US, these developments could enhance the appeal of UK companies focused on defensive industries and service economies.
Gervais Williams from Premier Miton Investors highlights the UK's low valuations and robust cash surpluses as key strengths. The FTSE 100 offers one of the highest dividend yields among developed markets at around 4%, compared to 3.3% for the Euro Stoxx 50 and 1.4% for the S&P 500. Financial stocks, comprising 21% of the FTSE 100, have performed exceptionally well, with companies like NatWest (NWG, Financial), Standard Chartered, and Barclays (BCS) seeing significant gains.
Despite good returns in 2024, UK stocks face challenges like fund outflows and low valuations, with UK large-cap stocks trading 40% lower than global peers.
