The American bull market, long propped up by the gilded promises of Big Tech, is showing cracks. As US stocks slump on fears of overvaluation and regulatory headwinds, a familiar pattern emerges: capital flight. The S&P 500 stumbled, the Nasdaq Composite took a bruising, and suddenly, London’s FTSE 100 looks like the sober uncle at a drunken party. But is this just a temporary wobble, or the start of a deeper rot?
Let’s be clear: the US market has been drunk on cheap money and AI hype for too long. The Federal Reserve’s rate hikes were supposed to sober things up, but the hangover is only now kicking in. The Magnificent Seven—Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta—are no longer rallying. They are diving. Why? Because their valuations were built on promises, not profits. Nvidia’s P/E ratio was over 70; even a whiff of slowed growth sends shockwaves. The US Justice Department’s antitrust actions against Alphabet and Apple add legal headaches to the financial cloud. Meanwhile, the US fiscal deficit—running at 6% of GDP—means endless government borrowing, crowding out private investment. That is a recipe for a correction, if not a crash.
Now enter London. The FTSE 100 is suddenly the darling of global capital. It offers something Wall Street has forgotten: dividends. British blue-chips like Shell, BP, and the miners produce real cash flow. Yields on the FTSE 100 are around 4%, double or triple the paltry returns from US treasuries after inflation. Gilts, too, are offering a safe harbour, with the 10-year yield above 4% and the Bank of England holding firm. Yes, the UK has its own problems—sticky inflation, stagnant growth—but compared to the US circus, it looks like a model of fiscal discipline. The budget deficit here is 4% of GDP, a full two points lower than America’s. And while the UK’s debt-to-GDP ratio is high, it is not accelerating at the same reckless pace.
Investors are voting with their feet. The pound has strengthened against the dollar as capital flows into London. The FTSE 100 is up 5% in the last month, while the S&P 500 is flat to negative. This is not just a flight to quality; it is a rebuke of the American model. The US has relied on consumer spending powered by unsustainable debt. When that debt becomes expensive, the party ends. Meanwhile, UK equities are cheap by historical standards. The cyclically adjusted price-to-earnings ratio for the FTSE 100 is 15; for the S&P 500, it is 30. One looks like a value trap; the other looks like a bubble.
But let us not get carried away. London’s safe harbour status is relative. The UK is not immune to global shocks. If the US market crashes hard, it will drag down everything. And the Bank of England is not exactly a beacon of independence anymore, with politicians breathing down its neck. Still, for now, the smart money is moving across the Atlantic. The question is: how long until this becomes a stampede?
The key dates to watch are next month’s US inflation data and the Fed’s rate decision. If inflation sticks above 3%, the Fed will not cut rates. That will squeeze the US consumer further. And when the American consumer stops spending, the whole world feels it. But in the meantime, London stands to gain. The capital flight is real, and it is accelerating. The bottom line? The US market’s love affair with Big Tech is ending. London’s traditional industries are back in fashion. For investors with a stomach for volatility, the trade is clear: sell American, buy British. Just do not expect the romance to last forever.
