Interactive Investor

Strategy wars: UK income versus US growth in 2022

9th June 2022 12:24

Lee Wild from interactive investor

It’s been a terrible 2022 for American tech stocks, but a much better year for more traditional defensive sectors in the UK. Here we demonstrate just how dramatic the shift in power has been.

Remember when US tech stocks were all the rage? Microsoft Corp (NASDAQ:MSFT), Alphabet Inc Class A (NASDAQ:GOOGL) (Google), Netflix Inc (NASDAQ:NFLX), Facebook owner Meta Platforms Inc Class A (NASDAQ:FB) and the rest were making new highs for fun. It seemed the good times would never end. But they did, and they were replaced in the list of top performers by a group of stocks who’d seen it all before.

Last autumn, gaming chip giant NVIDIA Corp (NASDAQ:NVDA) and Elon Musk’s Tesla Inc (NASDAQ:TSLA) were among the stocks to own. But there were already signs of vulnerability.  

The tide was turning even before New Year’s Eve countdown to 2022. Rising commodity prices were generating interest in miners and oil stocks like Rio Tinto (LSE:RIO) and Shell (LSE:SHEL), while other previously unfashionable UK dividend paying stocks found favour, among them British American Tobacco (LSE:BATS). The war in Ukraine has given BAE Systems (LSE:BA.) a boost and Vodafone's (LSE:VOD) generous dividend yield is compensation for a volatile share price.

While America’s Nasdaq tech index has lost as much as 30% this year, the FTSE 100 has been the index to own and is up 2.6% in 2022.

Here’s a look at just how dramatic and rapid the shift from US growth to UK income was through the final quarter of last year (rebased to 100) up to 10 May 2022. Watch the former glamour stocks in orange get replaced at the top by old school UK stocks in blue, most of which continue to enjoy their time in the sun and make multi-year highs.

Chart made with Flourish

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.