FTSE 100 continues longest winning streak in eight years – should you invest in UK equities?

The FTSE 100 closed 0.37% higher today, positing positive gains for the 13th consecutive trading session. It is the index's best run since early 2017.

Despite being hit by tariff-related disruption earlier this month, the blue-chip index has had a decent year so far, significantly outperforming its US counterpart. As of market close on 30 April, the FTSE 100 was up 3.9% year-to-date. The S&P 500 is currently down around 6% over the same period.

Commenting on the FTSE's recent string of gains, Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “The Trump trade shock has subsided and with tariffs on the back-burner for now, optimism is pulsing through the markets, helped by a raft of corporate results surprising on the upside.”

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

She added that the top gainers in the FTSE 100 have been a “mixed bag, demonstrating how the new-found confidence is lifting multiple sectors”.

There is also a growing sense that the UK market is a place of relative stability.

The UK doesn’t typically have a trade deficit with the US, meaning Trump hasn’t singled it out for higher tariffs. It has instead been caught by the 10% “baseline” tariff applied to almost all regions as a minimum measure.

The UK appears more sheltered than the European Union, which was threatened with a 20% levy (now paused for 90 days). Some countries in Asia have been threatened with tariffs of up to 50%, while China has been slapped with a 145% effective tariff rate.

The latest gains mean the FTSE has now recovered most of the losses suffered after 2 April, when Trump’s tariffs prompted a global market crash.

On top of this, the UK market could offer attractive valuation and income opportunities.

The UK market has been unloved since Brexit, and is trading at a discount to US equities as a result. The FTSE 100 has a price-to-earnings ratio of around 12.5, according to Bloomberg data, while the S&P 500 looks more expensive at 23.8.

As investors sour on the outlook for US equities, the UK market could benefit from stock market rotation.

UK equities also have a strong track record when it comes to delivering investment income, with the FTSE 100 home to some attractive dividend stocks. Dividends can offer a helpful buffer against share price losses during periods of volatility.

Although total dividend payments were 4.6% lower in the first quarter of 2025 than the same period a year ago, UK companies still returned £14 billion to investors in total. The UK market as a whole is expected to yield 3.7% over the next 12 months, according to stock transfer company Computershare.

UK equities: large-caps versus small and mid-caps

Although the FTSE 100 is the UK’s main market index, it is actually more internationally-exposed than other indices like the FTSE 250. This is because most of the companies held in the index operate globally, meaning their revenues come from all around the world.

If the US and UK agree a trade deal – and it is still a big ‘if’ – small and mid-cap companies could potentially see a bigger boost than their large-cap counterparts, as they are more exposed to the domestic economy.

In a report published this week, Stifel research analysts Iain Scouller and William Crighton, said a trade deal would likely result in “the removal of most, if not all, of the current 10% reciprocal tariffs”.

They believe UK exporters could see a boost in their revenues as a result, particularly compared with exporters in other countries facing higher tariffs.

“Whilst large FTSE 100 companies tend to have sprawling businesses with lots of moving parts and many factors influencing their share prices, we think many UK mid and small caps have more focused businesses, and those with significant exports to the USA stand to benefit from the clarity provided by a trade deal,” they added.

UK small and mid-caps have underperformed the large-cap market in recent years, and could be more impacted by domestic headwinds like the recent increase to employers’ National Insurance contributions.

Investors looking to hedge their bets with exposure across a range of market caps could consider a FTSE 350 tracker fund, which will have exposure to the large-cap FTSE 100 index and the mid-cap FTSE 250.

Those who want to throw some small caps into the mix as well could consider a FTSE All-Share tracker, which is an aggregation of the FTSE 100, FTSE 250 and FTSE Small Cap indices. This represents 98-99% of UK market cap.