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After years of political turbulence in Westminster and put up‑Brexit financial whiplash that drove capital away, the present US coverage chaos has propelled world traders again to London, turning the UK into 2025’s unlikely protected haven.
“Sure traders consider the US is a a lot higher-risk funding prospect below Trump they usually’ve taken cash off the desk and reallocated to different elements of the world together with the UK,” in line with Dan Coatsworth, funding analyst at AJ Bell.
“This can be a dramatic shift in considering, on condition that the US has been a high place to generate profits for years.”
US President Donald Trump’s administration has spent most of 2025 imposing, scrapping and re-imposing tariffs on its greatest buying and selling companions and allies.
“Political stability since final summer season’s normal election, together with the UK being the primary to strike a commerce settlement with the US below the Trump administration, have prompted sure abroad traders to assume once more in regards to the UK’s state of affairs and prospects,” Coatsworth continued.
The FTSE 100 Index broke the 9,000 valuation report in mid July, taking it 9 occasions above its baseline of 1,000.
The index’s earlier main milestone got here in February 2023, when it briefly pushed previous 8,000.
US greenback in freefall amid fights with the Fed
In Could, Moody’s downgraded america’ credit standing from AAA to AA1, marking the primary time in over a century that the US now not held a triple-A ranking from any main credit score company.
Final week, footage of Federal Reserve Chair Jerome Powell went viral as he stood subsequent to Trump throughout a go to to the Fed constructing, with the financial institution chief shaking his head in obvious disagreement.
Trump’s criticism of Powell — who’s arguably probably the most highly effective guardian of the greenback’s worth — has aggravated the foreign money’s regular slide because the new administration took workplace in January.
“Greenback weak point could have spurred UK traders to look nearer to house for alternatives. A weaker greenback versus the pound makes US belongings much less engaging,” defined Coatsworth.
Though the dollar has risen in current days, the greenback index continues to be down nearly 9% within the yr to this point.
Defence is a cash magnet
Trump’s departure from US international coverage norms, as an example by demanding that Europe pay extra for NATO whereas sending optimistic indicators to Russia, has shocked leaders throughout the continent, undermining world safety.
Curiosity in authorities defence spending throughout the EU and the UK has risen at a report tempo because the Chilly Conflict, with some governments quick‑monitoring multibillion‑euro offers for the procurement of missiles, drones and cybersecurity techniques.
This atmosphere has made Europe’s defence contractors prime targets for recent capital as traders search for belongings that may outpace geopolitical shockwaves.
Fresnillo, Babcock and Rolls-Royce, all both defence contractors or engaged on defence-adjacent initiatives, are the best-performing FTSE shares up to now in 2025.
“The UK inventory market has a wealth of defence contractors which have attracted investor curiosity in opposition to a backdrop of elevated authorities spending on areas like cybersecurity and army forces,” Coatsworth added.
A cut price for traders?
“Valuation is another excuse the UK has functioned as a magnet for folks switching out of US markets,” stated Coatsworth, as FTSE shares are cheaper than US options.
“American shares are costly while you take a look at standard valuation metrics. For instance, the S&P 500 index trades on 22.2 occasions subsequent 12 months’ earnings … In distinction, the FTSE 100 trades on a mere 12.6 occasions ahead earnings.”