Last year the technology sector got spanked: America’s tech-heavy Nasdaq index fell by 33.5%. The FTSE 100 index, however, outperformed America’s S&P 500 in 2022 – a rare occurrence and a result of our blue-chip index being full of “old-economy” stocks rather than tech stars. The UK market doesn’t have a tech-friendly reputation. Tech firms here have achieved poorer valuations than their US counterparts because British investors tend to be risk-averse. US investors have a bigger risk appetite when it comes to funding loss-making firms until they achieve the hoped for scale.
This means they can then take advantage of the firms’ rapid growth and convert it into huge profits. But the UK market is more interested in dividends, so it isn’t as willing to fund unprofitable ventures. No wonder Britain’s popular unicorns (start-ups worth at least $1bn) often relocate to America.
Moreover, although the London Stock Exchange has been trying to revive London’s reputation as a premier
