It’s early days, however the FTSE 100 has made a really sturdy begin to 2025. The index is up 6.2% thus far this 12 months, which is comfortably higher than the three.4% the S&P 500 has achieved. 

Regardless of this, UK shares nonetheless commerce at decrease price-to-earnings (P/E) multiples than their US counterparts. So is that this the time for traders to have a look at shopping for FTSE 100 shares?

Rates of interest

An enormous motive the UK’s been the place to be for traders in 2025 has been rates of interest. The Financial institution of England (BoE) has been bringing down rates of interest, whereas the Federal Reserve hasn’t.

Moreover, this appears to be like set to proceed. On the final Financial Coverage Committee assembly, two of the seven members voted to cut back charges by 0.5%, slightly than the 0.25% reduce that materialised.

Throughout the Atlantic, the Federal Reserve’s indicated that traders shouldn’t anticipate price cuts within the close to future. So the outlook for the S&P 500 may be much less promising.

This nonetheless, is just one a part of the equation. The explanation the BoE’s chopping charges is the financial system isn’t rising – the newest information signifies that GDP is stagnant.

The US doesn’t have this drawback – its newest GDP progress determine is 2.3%. However inflation throughout the Atlantic is at the moment at 3%, which is increased than the two.5% the UK is coping with.

In each instances, there’s scope for the state of affairs to worsen. So the query is what traders ought to do to get themselves in one of the best place.

Shopping for shares

In relation to investing in shares, I believe an important factor over the long run is the standard of the underlying enterprise. That’s true no matter which aspect of the Atlantic I’m wanting.

The long run may contain inflation, a recession, neither, or each. However I can’t consider a state of affairs the place I’d favor to personal shares in a low-quality enterprise over a high-quality one. 

A great instance is Howden Joinery Group (LSE:HWDN). I’m not saying the enterprise is resistant to the specter of a recession – it isn’t – and that’s a danger traders shouldn’t ignore.

The corporate can’t do a lot about GDP progress, nevertheless it does a very good job of managing the issues it might management. And I believe the result’s a enterprise that has a really sturdy aggressive place.

The primary factor that stands out to me concerning the agency is its value construction. Promoting completely to commerce means it might function out of warehouses, which value much less to hire than retail showrooms.

That places Howden ready to cost prospects lower than its rivals whereas nonetheless sustaining wider margins. As I see it, that’s a robust mixture which means the inventory’s price contemplating.

Lengthy-term investing

I believe a key motive why the FTSE 100 has been outperforming the S&P 500 (thus far) in 2025 is the outlook for rates of interest is rather more optimistic. However issues are extra sophisticated than this. 

In my opinion, one of the simplest ways to bypass these problems is to deal with shopping for shares in high quality firms. And these exist within the UK in addition to within the US.