For most of the last quarter-century, the FTSE 100 has been a dead duck.
Since the dot-com peak around the year 2000, the UK’s flagship index has effectively gone sideways for a generation while U.S. markets, particularly the Nasdaq, have gone vertical. In real terms, and certainly in dollar terms, UK equities have been a dead zone compared to their American peers.
But this is now changing.
Look closely at a long-term chart of the FTSE 100 and you can see something that has been conspicuously absent for decades: the early formation of a classic “hockey stick” breakout. After oscillating between roughly 6,500 and 8,000 for years, the index has recently moved decisively higher to 10,700 marking the first meaningful structural shift in trend since the early 2000s. I have been writing about this potential for sometime here but no it is on its way.
On its own, that would be notable.
Set against the Dow Jones Industrial Average, however, the picture becomes far more compelling. The relative performance gap between U.S. and UK equities has widened dramatically over the past twenty-five years. That gap represents valuation divergence and divergence in markets rarely persists indefinitely. Theoretically its not even meant to be possible.
Catch-up trades happen and it appears to be happening in London at last.
The question is what might drive it.
Dollar Risk Is Becoming A Portfolio Risk
Markets today are pricing macro regime change and the big one is an upcoming dollar depreciation.
If the United States is entering a period of structurally higher inflation, driven in part by the capital expenditure demands of AI infrastructure, reshoring and industrial policy then maintaining global economic leadership will require running the domestic economy “hot.”
To me that implies inflation in the 5–6% range over the medium term.
A weak U.S. dollar drives hedging so for investors heavily exposed to U.S. equities, reducing dollar exposure without exiting equity markets becomes an attractive option.
One route is gold. We’ve seen that.
Another is currency-diversified equities.
ADR Substitution As A Currency Hedge
Imagine a U.S. investor holding a large position in a multinational pharmaceutical company such as Pfizer. Rather than liquidating the position entirely, the investor can reduce exposure to the dollar, say by 20%, by rotating that capital into a comparable UK-listed multinational via its ADR, or example, AstraZeneca or GSK.
These are not domestic UK cyclicals dependent on British GDP growth. They are globally diversified firms earning revenues across currencies and jurisdictions. Yet because they are listed in London and denominated in sterling, they often trade at materially lower valuation multiples than their U.S. equivalents, on price-to-earnings, price-to-sales or enterprise value metrics.
The result is a similar equity exposure but with reduced dollar denomination, comparable sector risk, potential valuation upside and embedded currency diversification
From a portfolio construction perspective, this is effectively a short-dollar position built with equities rather than forex derivatives.
The FTSE 100 itself is composed largely of international earners—energy majors, pharmaceuticals, financials and consumer giants with global revenue streams. Its historic underperformance is not primarily a function of inferior business quality but of listing venue, currency denomination and irritating tax regime with retrograde governance.
In other words, global companies have been trading at a persistent geographic discount.
Should capital begin to rotate away from dollar concentration risk, even marginally, the FTSE 100 has significant relative headroom simply to start to mean-revert towards the Dow Jones Industrial Averages valuation dynamics. Lets not even consider the sort of valuations of some Nasdaq giants. let alone the S&P 500 or Nasdaq.
That process can and likely will sustain a multi-year rerating cycle.
Hedging The Dollar Without Leaving Equities
For investors worried about dollar depreciation but unwilling to abandon equity exposure, allocating a portion of capital to FTSE 100-tracking ETFs or ADRs of sterling-denominated multinationals offers a pragmatic alternative.
This is not a directional bet on the UK economy.
It is a currency hedge implemented through equity substitution, maintaining exposure to global earnings streams, while diversifying away from a weakening dollar set to undercut profits by slow but steady depreciation. This is not the death of the dollar, merely a slimming down of an overvalued currency.
In this early stage of a structural breakout, the FTSE 100’s long dormancy may give way to a catch-up phase purely driven by global capital rebalancing and what has been one of the least loved developed-market indices of the past twenty-five years will suddenly be outperforming.
15000 doesn’t seem like much of a stretched and for single stock pickers the field look packed with value