A closer look at the top stocks and performance of the US and UK stock markets
In recent years, US investors have been increasingly looking across the pond to British stocks, intrigued by the opportunities available on the UK stock market. However, it’s no surprise that with the strong performance of the US stock market, many are also finding attractive opportunities right in their backyard. But how do the stock markets in the US and UK compare, and what stocks are making waves in both regions?
Let’s take a closer look at the key differences between the US and UK stock markets, explore the five most popular stocks on each side of the Atlantic, and break down how investors are navigating these markets.
The US Stock Market: A Powerhouse of Growth
The US stock market is often seen as the engine driving global investment, with the S&P 500 index being its flagship. This index includes 500 of the largest companies in the US and represents about 80% of the US stock market’s total market capitalization. Over the last few years, the S&P 500 has experienced incredible growth, posting a 32% return in 2023 and a 22% return in 2024.
The S&P 500 is market-cap weighted, meaning that the bigger companies in the index have more influence on the overall performance. The top names driving the market are often referred to as the “Magnificent Seven,” including Apple, Nvidia, Microsoft, Amazon, Meta (formerly Facebook), Tesla, and Alphabet (Google’s parent company). These tech giants are key players, and together they account for a significant portion of the entire index, which has raised concerns about over-concentration.
Technology companies have seen rapid growth, with the sector making up a massive 32.5% of the S&P 500. Other leading sectors include financials at 13.6% and consumer discretionary at 11.3%.
The UK Stock Market: Stability with a Focus on Dividends
On the other side of the world, the UK stock market is led by indices like the FTSE 100 and the FTSE All-Share, which includes a broader selection of UK companies. The FTSE 100 tracks the largest 100 companies, while the FTSE All-Share includes those plus mid-cap and small-cap stocks, covering about 98% of the UK stock market.
The UK market has been more modest compared to the US, especially in terms of growth. For example, while the S&P 500 has been on a tear, the FTSE All-Share delivered a solid return of 9.5% in 2024, which is impressive but not quite on par with US returns. Additionally, the UK market has a more significant focus on dividends, offering a yield of 3.59%, which is higher than the US’s 1.24% from the S&P 500.
UK stocks tend to be more diversified across sectors like energy, pharmaceuticals, and banking, which helps investors balance risk with long-term stability.
Popular Stocks: US vs UK
So which stocks are taking the spotlight for investors in the US and the UK? Let’s break it down:
US Investors’ Favorites:
- Apple (AAPL) – As one of the largest companies in the world, Apple continues to be a top pick for investors thanks to its innovation in tech products and services.
- Nvidia (NVDA) – A leader in semiconductors and artificial intelligence, Nvidia remains a popular stock for those looking to capitalize on the future of tech.
- Microsoft (MSFT) – Microsoft is a long-time favorite due to its strength in cloud computing, software, and enterprise services.
- Amazon (AMZN) – As the dominant force in e-commerce and cloud computing, Amazon continues to grow, making it an attractive stock for investors.
- Tesla (TSLA) – Tesla’s leadership in electric vehicles (EVs) and renewable energy keeps it at the top of US investors’ minds.
UK Investors’ Favorites:
- AstraZeneca (AZN) – As a major player in the pharmaceutical industry, AstraZeneca’s reputation for innovation and strong performance makes it a favorite.
- Shell (SHEL) – Shell continues to lead the energy sector, with a focus on renewable energy initiatives and its oil and gas portfolio.
- HSBC (HSBC) – As one of the largest global banks, HSBC remains a solid choice for UK investors looking to gain exposure to financial services.
- Unilever (ULVR) – Known for its consumer goods like Dove and Ben & Jerry’s, Unilever is a staple in many portfolios due to its stability and steady dividend yield.
- Diageo (DGE) – As the world’s largest spirits company, Diageo continues to be a favorite among UK investors, known for brands like Guinness and Johnnie Walker.
Key Differences Between the US and UK Markets
While both markets offer solid investment opportunities, there are several key differences between the US and UK stock markets:
- Growth vs. Dividends: The US stock market, especially the S&P 500, is growth-focused, driven largely by technology stocks. Meanwhile, the UK market places more emphasis on dividend-paying stocks, making it more appealing for investors looking for steady income.
- Technology Dominance: In the US, technology stocks like Apple, Microsoft, and Tesla are the dominant players. In contrast, the UK market is more diverse, with sectors like pharmaceuticals (AstraZeneca), energy (Shell), and financials (HSBC) playing significant roles.
- Performance: Over the past few years, the US stock market has significantly outperformed the UK, though the UK market has shown steady returns and resilience, especially in times of market uncertainty.
Summing Up
Both the US and UK stock markets offer unique opportunities, but they cater to different types of investors. The US market’s heavy focus on technology and growth stocks, like Apple, Nvidia, and Amazon, has driven remarkable performance. However, for those looking for more stability and dividend returns, the UK market with its diverse mix of sectors like pharmaceuticals, energy, and banking remains a solid choice.
Understanding these differences and knowing which stocks are popular in each region can help investors make better-informed decisions based on their own financial goals and risk tolerance.