Trump’s trade chaos could be London’s market moment

As we are all only too aware, Donald Trump has spent his first three months in office merrily upending anything he can get his hands on. With his tariff's causing a seismic disruption of global markets, we are now in a world of far greater uncertainty and potential for a global recession. We are also only one sixteenth of the way through Trump’s second, and perhaps not final, term as well, so there will no doubt be plenty more fun and games ahead.

However, erosion of the US’s global standing could offer potential positives to the UK. Nature abhors a vacuum after all and where the US steps back the UK could, where appropriate, take the opportunity to step in.

With its rich history as a global financial hub, London’s capital markets is one of the more obvious fields in which the UK might seek to benefit. Since 2016’s Brexit - the UK’s own reckless experiment with protectionism - the London market has undergone nine successive years of outflows, with 2024 the worst year on record when £9.6 billion left our shores, mostly headed for America. 

Current uncertainty in the US stock market offers a chance for the UK to reverse this trend. Money is already flowing from the US, and there are a host of reasons why the UK specifically represents a port in a storm amid the market turmoil.

Not least of these are the depressed valuations of UK stocks following so many years of market outflows. The average price earnings multiple of the FTSE 100 is currently 12.2 against 33.1 for the Nasdaq. This greatly limits exposure to further price falls in comparison to the ‘toppy’ US market.

In addition, most of the UK’s listed businesses offer services rather than goods, such as finance, insurance or software, which aren’t subject to tariffs. Those companies that do make products are also typically in defensive sectors. Over a quarter of the capitalisation of the FTSE All Share is made up of healthcare and consumer staples companies, which produce goods we will always pay for, whether in recession or not. The FTSE 100 also yields over 3.6% percent at present, reflecting the fact it is composed more of mature, income generating businesses as opposed to the riskier growth stocks that dominate the US market.

The UK’s market practitioners, as well as the government, should be doing all they can to highlight these facts, persuading global investors to direct some of their investment dollars our way. The UK market was once revered across the globe as the greatest in the world, backed by deep pools of capital, political certainty, and sensible, appropriate regulation.  If we seize the opportunity this could be the case again.