The FTSE 100 index has been holding strong despite the recent trend of overseas takeovers of UK companies. While companies like DCC and Segro have succumbed to foreign acquisitions, the FTSE 100 has demonstrated its defensive capabilities in the face of uncertainties surrounding the AI boom in other markets.

Contrary to popular belief, UK shares have performed just as well as their American counterparts in the year to date. The FTSE 100 and S&P 500 have shown similar returns in sterling terms, despite the hype surrounding AI in the US market. Since the launch of ChatGPT in November 2022, the FTSE has delivered a 64% return compared to the S&P 500’s 72%, taking into account the impact of currency fluctuations for UK investors.

Although the UK market faces challenges such as limited fund inflows and a lack of new companies to replace those that leave, investors who are already invested are reaping the benefits of attractive valuations and reliable companies. Dividend growth continues to be strong, supported by share repurchases that contribute to overall returns for investors.

One notable trend from the recent earnings season is the number of companies that have met or exceeded analyst expectations. The FTSE 100 and FTSE 250 have reached record highs, partly due to the underestimation of UK companies by analysts and investors. The UK’s resilient macroeconomic backdrop and stronger-than-expected economic growth have boosted investor confidence in the market.

While the Nasdaq remains the benchmark of choice for many global investors due to its focus on technology shares, the US market’s reliance on the AI boom poses risks. Capital Economics’ analysis suggests that the recent rise in forward earnings estimates for big-tech sectors may not be sustainable, as it is tied to the ongoing shortage of memory chips and other factors.

Overall, the slow and steady growth of the UK market offers a reassuring contrast to the volatile nature of the AI-driven US market. While AI-related stocks have seen significant gains, their success is closely tied to the performance of major players in the industry. The UK market’s stability and consistent performance provide a sense of security for investors amidst the uncertainty in global markets.