U.K. stocks are at an all-time high; here's what's driving gains

Chris J Ratcliffe

The U.K.'s benchmark FTSE-100 (UKX) closed at a record high last week, topping 7,900.

U.K. equities gained more than their U.S. counterparts over the last six months, with the FTSE up 5.25% compared with the S&P 500 (SP500) (SPY) off 0.5% (although the FTSE trails year to date, up 5.2% vs. 8.2%).

Among the chief drivers of recent gains are a weaker pound (FXB) helping an index tilted to companies with lots of overseas sales. In addition the heavy representation of energy and financial companies helped outperformance.

The top year-to-date components are dominated by travel names: easyJet (OTCQX:EJTTF), +50%, Carnival (CUK), up +48%, British Airways parent IAG (OTCPK:ICAGY), +37%, travel company Tui (OTCPK:TUIFF) +33% and Intermediate Capital (OTCPK:ICGUF) +28%.

The U.S. "turned out to be the top-performing major developed market last year, despite all the trouble it had," Leuthold Group said. "The resilience of U.K. assets is simply remarkable! The 2023 time cycle looks very promising for U.K. stocks."

J.P. Morgan's global strategy team is Overweight U.K. equities and says valuations "look very attractive post 6 years of underperformance."

See SA contributor John Kingham's forecast for the FTSE-100 for 2023.