- FTSE 100 outperforms Dow Jones, S&P 500 and NASDAQ in first quarter
- Dividend increases easily outpace cuts across the UK’s lead index
- Buybacks are running ahead of 2024’s pace
- Earnings beats and upgrades are just edging ahead of misses and downgrades
“While some investors may be tempted to dismiss them as a typical 1 April prank, the statistics for the world’s major stock market indices clearly show that the UK is doing better than the USA in the year to date and that America is actually one of the world’s poorest performers worldwide. The FTSE 100 gained some 5% in capital terms, while the Dow Jones, S&P 500 and NASDAQ all fell,” says AJ Bell investment director Russ Mould.
“Three months of good news is only a starting point, but earnings, dividend and buyback announcements from the UK in the first quarter of 2025 all help to justify the improved showing, even if the challenge of tariffs is the next one for investors to confront.
Source: LSEG Refinitiv data
“The ongoing weakness in mid- and small caps, as evidenced by the declines in the FTSE 250 and the FTSE AIM All-Share, also mean it is too early for patient, and long-suffering, bulls of UK to be doing a victory lap. But at least the FTSE 100’s mix of financials, oils and miners is at least proving better suited to an environment where low inflation, low interest rates and low, if steady, growth can no longer be taken for granted and some key figures also provide support to their stance.
“Across the FTSE 100, dividend increases continue to outpace cuts, and they do so by a wide margin. Sixty-four members of the index with a December, January or February year-end have already published their full-year figures and of those fifty-one increased their total dividend for 2024. Six left their dividend unchanged and just six reduced the distribution.
“Overall dividend payments from the FTSE 100 look set to have risen by just 1% in 2024 but analysts are looking for a 5% increase in 2025 and the positive end to last year at least provides some support to that view.
Source: Company accounts, Marketscreener, consensus analysts’ forecasts
“The lead index’s members also continued to supplement dividend payments with share buybacks. In the first three months of 2025, thirty-one FTSE 100 constituents announced new buyback programmes with a target aggregate value of £23.1 billion and forty members in total are running such schemes with value of £29.2 billion, including those launched in 2024 that are still ongoing.
“In the first three months of 2024, twenty FTSE 100 firms announced new buybacks, and they had a total value of £16.7 billion. The index is therefore on track to challenge the 2024’s total of some £57 billion, itself only a fraction below the record sum of £58.2 billion returned to shareholders via this mechanism in 2022.
Source: Company accounts, Marketscreener, consensus analysts’ forecasts
“Finally, positive earnings surprises and upgrades continue to outpace negative surprises and profit warnings.
“Admittedly, the margin here is thin, with seventeen beats and upgrades to sixteen misses and warnings, but after a difficult start momentum has begun to improve.
Source: Company accounts
“Across the whole UK market, the balance between earnings surprises and disappointments is also close, with a first-quarter tally of 110 positive reports and 108 negative ones. Here the trend is a little different, though, as good news came early, and bad news has begun to catch up.
Source: Company accounts
“Mid- and small caps tend to have narrower ranges of products and services, as well as geographically, so they can be affected more quickly by bad news than the multinational mega-caps.
“In this respect, holders of UK equities will be hoping that the slant toward negative announcements lower down the market cap echelons is not a harbinger of more bad news to come, and whatever tariffs President Trump declares on 2 April could have a say in the trends that become evident in the second quarter and beyond.
“The good news, from the FTSE 100’s point of view, is analysts currently expect underlying net income to come in flat in 2025 against 2024’s total of £173 billion. This looks more realistic, in the current environment, than estimates for mid-teens percentage earnings growth in 2025 and 2026 which prevail in the USA as we head into the first-quarter earnings season stateside.
Source: Company accounts, Marketscreener, consensus analysts’ forecasts
“Moreover, the UK trades on a lower valuation, at 13 times forecasts 2025 earnings compared to nearly 23 times in the USA, and that combination of lower expectations and a lower price tag might help to shield the UK market to a greater degree should tariffs, trade and President Trump mean things turn more volatile.”
