The FTSE 100 has been climbing in 2026, yet it still looks like incredible value against the S&P 500 right now. In fact, it hasn’t looked this cheap against its US peers on this basis since the early 2000s.

If you’ve been investing in Footsie stocks this year, you’ve probably seen the UK large-cap index continue to climb. The index is up 5.4% year-to-date to 10,491 as I write on Monday afternoon (5 October).

Across the Atlantic, it’s been good news for investors in the S&P 500 too. The US large-cap index is sitting just shy of a record high, fuelled by hot growth stocks like SpaceX cashing in on the artificial intelligence boom sweeping the world.

But despite those gains, investors may not have noticed the Footsie quietly looking like better and better value against its US counterpart. Here’s the metric that I’m watching closely and why I’m personally investing a little closer to home.

What’s the metric?

I’ve been analysing the price-to-earnings (P/E) ratio of both indexes. The Footsie currently boasts a forward P/E ratio of around 12.5 right now. By contrast, the S&P 500 is sitting at around 20, meaning the UK index is roughly 37.5% cheaper based on this metric. That’s towards the widest end of the 20-year historical range between the two.

It’s not the discrepancy that’s caught my eye, but rather that it’s come despite strong Footsie gains and near all-time highs.

The S&P 500 top 10 companies account for approximately one-third of the total index weight and over two-thirds of its earnings growth. Of course, the P/E ratio is just one metric and doesn’t tell the full story.

However, I think investors need to believe the US growth story including a sustained AI boom to justify the valuation gap. Otherwise, UK stocks could be compelling on a relative value basis.

Where I’m investing today

I’ve been thinking about my own portfolio and how I can diversify it for the years ahead. One stock I keep coming back to is Rolls-Royce (LSE: RR).

I recently bought more shares following the company’s strong earnings results, which showed it firing on all cylinders at the moment. The combination of increased defence spending, heightened need for energy security, and strong recovery in civil aviation means that I’m optimistic about the company’s medium-term growth prospects.

It certainly doesn’t come cheap. The stock is trading at a P/E ratio north of 40 as I write with a market cap now over £120bn, having gained 23.7% in 2026 alone. That valuation could come under pressure if we see supply chain disruption or a reversal of the aviation recovery we’ve seen of late.

One other aspect that caught my eye was management’s guidance. In its latest half-year results, the company increased both operating profit and free cash flow guidance on the back of its continued operational and strategic progress.

A strong start to the year enables us to raise our guidance for 2026 despite the conflict in the Middle East. We now expect to deliver underlying operating profit of £4.7bn to £4.9bn and free cash flow of £3.8bn to £4bn. 

Tufan Erginbilgic, CEO

All in all, for investors seeking a market leader with a strong growth prospects, I think it’s definitely worth a closer look.

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Ken Hall owns shares in Rolls-Royce.