What is the UK Valuation?
This gauge measures the United Kingdom market — proxied by the FTSE 100 — relative to its own long-term trend, showing at a glance whether United Kingdom equities are cheap, fairly valued or stretched. United Kingdom is a market dominated by energy majors, miners, banks and consumer-staples multinationals earning heavily overseas. Rather than compare across countries (which is distorted by different sector mixes and accounting standards), this indicator compares the market to its own five-year moving average, so a reading of 100 means the market sits exactly on trend, a reading above 120 means it trades more than 20% above its recent norm, and a reading below 85 signals unusual cheapness. This trend-relative approach is transparent and honest: it does not require the total-market-capitalisation figures that a true Buffett Indicator needs and that are not freely available for most markets. Because it is anchored to each market's own history, it is especially useful for spotting when a market has run far ahead of, or fallen well behind, its typical level.
Formula & Methodology
Created by Trend-deviation valuation model.
Historical Performance & Limitations
A trend-relative gauge cannot say whether the trend itself is over- or under-valued in absolute terms — only whether the market is stretched versus its own recent history. Structural regime changes (a lasting re-rating) can keep readings elevated for years. It is a context tool, not a timing signal.
Status Classification
| Level | Meaning |
|---|---|
| Strong Undervaluation | Market trading significantly below historical average |
| Fair Value | Market aligned with historical valuation metrics |
| Moderate Overvaluation | Market elevated above historical norms |
| Severely Overvalued | Extreme historical deviation; high downside risk |