From Chaos to Confidence: Can the UK benefit from American turbulence?

The first half of 2025 has been far from the quiet, consistent and predicable environment global markets love for growth, and has often felt like a roller coaster you never signed up for… and can’t get off. President Trump’s return to the White House has rocked global markets with a deluge of tariffs, policy reversals, and geopolitical tension. But, while the world has been focused on the stumbles of the world’s largest economy, a quieter story is writing itself in Europe, one of rebirth and opportunity. As the US grapples with uncertainty, the UK is quietly stepping into the spotlight, but can the quiet and comparatively restrained underdog win over investors? 

President Trump’s aggressive trade policy, ironically named “Liberation Day” by the administration, triggered a global sell-off in April. Tariffs of up to 145% on Chinese goods and 50% on EU imports sent shockwaves through supply chains and investor sentiment. This resulted in a -0.5% contraction in US Q1 GDP, rising jobless claims, and a 9% drop in the US dollar year-to-date, it seems that so far, the only thing the US has been liberated from is growth.. 

Whilst headlines at the time were keen to point out that this caused a 10.7% drop in the FTSE 100 in a week, it has since bounced back stronger after a month of strong regrowth after the announcement and continued increase since then. This recovery highlights the resilience of the UK economy, and that we may have created enough distance between ourselves and the US to capitalise on the chaos. 

The uncertainty has been so widespread in the US that even the Federal Reserve has paused its rate cutting cycle, desperately trying to toe the line between inflationary pressures and slowing growth. Meanwhile, capital investment is stalling, and confidence, both consumer and corporate, is faltering. I would be doing us all a disservice if I didn’t mention the new nickname that has stemmed from the erratic nature of US policies, leading to ‘TACO’, short for “Trump Always Chickens Out”, highlighting the distinct lack of faith in US economic policy, and causing US investors to effectively bet against their own government. 

While the US stumbles, we are quietly gaining ground. UK mid and small caps have outperformed their US counterparts since April, and European indices like the DAX and CAC have posted strong year-to-date gains. Asset allocators such as JM Finn and Albert E Sharp are beginning to rebalance away from US equities, and early movers are already increasing their exposure to undervalued European markets.

Following the difficult landscape of the past few years, the UK market is showing encouraging signs of life. The price-to-earnings ratio (P/E), which compares a company’s share price to its earnings per share, is currently 13.4x for the FTSE All-Share. This suggests the UK market offers significantly better value than the S&P 500, which trades at 22.7x, meaning investors get more earnings for every pound invested. It is also important to note that around 30% of UK-listed companies with a market capitalisation below £500 million are trading at less than 10x earnings, offering more than twice the value compared to the S&P 500, a long-standing benchmark for long-term investors.

Not only that, but whilst the US saw a 0.5% contraction in GDP in Q1, the UK grew by 0.7%. Whilst the UK media is keen to highlight that this is below target and shows that we are still not out of the woods yet, it shows a clear gap forming between the two economies, though it is unknown how long this trend will continue for.  

As we move into the second half of 2025, the global investment narrative is shifting. The US, once a global beacon of growth, is now a source of volatility, with Wall Street investors betting against their own president to make returns. The UK, ever the conservative underdog, is emerging as a stable, undervalued, and increasingly confident alternative. 

With infrastructure investment rising, interest rates falling, and equity valuations still attractive, the stage is set for a resurgence. Only time will tell if this confidence will convert into growth, but with UK consumers sitting on a 12% savings rate, and their debt-to-income ratios falling, we could be due for a spending boom once the right signals are shown.