Is now a good time to buy UK FTSE shares?

The FTSE 100 index stands just 15% higher than its level of 31 December 1999, representing a compound annual gain of barely 0.5% per annum. 

UK investors, insurance companies and pension companies have started to see the light and are leaving UK stocks for the shinier US market. A few UK companies are even starting to de-list from the FTSE and move over to the New York/NASDAQ stock exchanges.

However, if you discount the USA's 'Magnificent Seven', the UK has still performed quite well. Good UK companies are well diversified and pay good dividends. The UK also has some solid top performers as shown below (gains in 1 year):

• RR      Rolls Royce 67%
• NWG  NatWest Group 63%
• SMDS Smith(DS) Group 51%
• HL       Hargreaves Lansdown 49%
• BARC Barclays 48%

Compared to the USA however, the FTSE's performance has been dismally poor.

The good news is that many believe that the top US companies are now too heavily overvalued and some canny investors are now looking at the UK to snap up undervalued UK 'value' stocks.

The election of Trump has given yet another boost to the NY stock exchange, especially to Tech, Finance and Crypto shares, but the boost is purely built on sentiment and expectation. In 2025 we may see the Emperor's  new clothes for what they truly are and US investors may suffer a painful correction unless they have a well diversified portfolio.

So should I buy into the FTSE now?

The UK FTSE does contain some very good, well diversified companies, but I think that at the moment, USA stocks are still performing well while UK stocks have been virtually stagnant over the last 6 months. The new Labour government seems to have done very little to encourage businesses to invest in the UK but everything it can to encourage UK-resident investors to leave the country!

I have recently bought a few FTSE shares in Shell, Rolls Royce, Mastercard, Marks and Spencer and Reckitt Benckiser (and ASML). These have shown me a 2.5% overall gain in the last month so far (Nov 4 2024 - Dec 5 2024) and I expect some small dividend payments this month too.

However, I will keep a very close eye on my portfolio stocks during 2025 and maybe further invest in individual UK companies but I will keep my FTSE holdings to less than 5% of my portfolio as I still prefer US and Global ETFs.

It may be better to choose a world ex-UK ETF (such as Vanguard B59G4Q7) as my core ETF and then pick a few individual quality UK companies...