The British FTSE100 will outperform the S&P500 untill the end of Trump

AI Summary

The author argues that the FTSE 100 will outperform the S&P 500 due to lower valuations, AI insulation, and political instability in the US.

ISF.L — LONG The FTSE 100 offers better value with a lower P/E ratio compared to the S&P 500 and provides insulation from potential US AI bubble risks. Additionally, the author expects the USD to decline and US political volatility to negatively impact American assets, favoring European diversification.

British Stocks have a lower average P/E ratio versus the S&P500s, with an average P/E of 17 to the S&P's 28.

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JPMorgan, Goldman Sachs and the likes incorrectly estimated that the S&P500 would beat the FTSE100 in 2025, I believe the same fundamental's that caused this will still exist in 2026.

1. Value Matters

British Stocks have a lower average P/E ratio versus the S&P500s, with an average P/E of 17 to the S&P's 28. This is typically due to lower growth estimates and a smaller tech stack. British infrastructure stocks have announced record investment in recent years, and will still provide their relatively larger dividends.

2. AI Insulation

The IMF issued a warning this week about the effect of a pop in a potential AI bubble. US stocks are of course the most exposed to any potential AI downside and are relying on strong earnings reports this year.

3. Long Term Stability

Trump's stance on Greenland has provided a unifying point for European politics. The effect Trump had on switching the outcome of the latest Canadian election, is being seen to a lesser extent across nations in Europe. On the otherside, a potenitally bias Fed chair in the US will tip the scales further.

4. Improving Regulatory Outlook

At Davos this week Macron highlighted Europe's overregulation. This being brought up so publicly creates positive sentiment towards improved offerings across the continent and highlights recent genuine measures to cut red tape

5. USD Decline

Even if European stocks do not intrinsically outperform the S&P 500, every time the world is graced with another truth social post, the USD falls. The USD was down 10% in 2025.

6. Trumpism

As an outsider with no skin in the game I was concerned watching Biden's performance degrade over his term. Did Biden's health and performance improve over his presidency? Why would President Trump's be any different?

If threatening to invade allies is Trump's Year 1, how exposed do I want to be to his year 4?

In the FTSE, your portfolio will be better insulated from Trump's degrading mental health:  
\-You are not going to have your stock's key product banned overnight (wind turbines)  
\-Or key manufaturing imports tariffed (Canada's automotive imputs)  
\-Nor will you be caught on the wrong side of one of their more apparent government back pump and dumps.  
\-For as long as Trump is in power, he is unpredictable, but predictably more volatile as he gets older.

TLDR; I am bullish on Europe, because Trumps degrading of American assets is either directly benefiting the Europeans, or scaring the Europeans into action. I am not saying go 0% US, but if you are sitting 100% US, maybe now is time to consider diversifying.

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