Gloom still fills the headlines so it’s no wonder that the FTSE 100 is off to a weak start in 2024.
We’re glued to what the pessimists say. And tales of pending disaster draw the eyeballs like nothing else.
It’s easy to be negative. Those who turn out to be wrong are quickly forgotten, and they can soon have another go.
The optimists?
And we long-term, low-drama optimists don’t get the same airtime. The “It’s fine, just you wait and see” approach doesn’t seem to fit with today’s short-term focus.
Pointing out that the great majority of years of stock market history have been winners, not losers? It doesn’t get the heart going in the same way.
Good year for stocks?
This might sound like some sort of ‘Always look on the bright side of life’ party manifesto.
But I think 2024 could turn out to be one of the best years for the FTSE 100 that we’ve seen for a while.
It’s all eyes on interest rates right now. That makes sense, as they’re costing mortage borrowers so much.
And Bank of England (BoE) Governor Andrew Bailey is sticking with his dour outlook — more pain, for longer.
But it seems not everyone agrees.
Mortgage rate cuts
Inflation dropped to 3.9% in November, and it looks like lenders already anticipate an early 2024 rates cut.
There’s a mortgage price war building as Barclays and Santander have joined those that have already cut their rates.
And I reckon the start of BoE cuts could signal the start of a UK stock market recovery. With so many FTSE 100 stocks looking cheap and on high forecast dividends, it might just be a big one.
Perhaps I sound like I’m trying time the market here. But I don’t mean to because it’s a very hard thing to do.
Am I wrong?
I might be wrong about the Footsie’s prospects this year too.
If bond yields stay high, and the economy looks shaky for much longer, investors might not want to risk their money back in the stock market for a while yet.
We could also be in for a second spell of rising inflation — I’ve seen some sources suggesting it.
So, even when we do get interest rate cuts, there could still be a lag before stock prices respond.
Valuation, valuation
But the timing doesn’t matter. It’s valuation that counts.
When share prices are low on fundamental measures, dividend yields are above their long-term averages, and earnings look set to rise steadily, I think there’s only one thing to do.
I’m sure we’ll see a strong stock market sooner or later. Share prices do have a track record of getting back to their average long-term values after each boom or bust.
Buy cheap shares
So I want to act in 2024 as if there’s a market surge coming — no matter how long I have to wait for it — and buy as many shares as I can.
I just want to be ready for when the next bull market comes.
