UK share prices are exploding in Monday afternoon business. But I’m not getting too carried away. I don’t mean to rain on everyone’s parade but the global economy isn’t out of the woods. And there remains a long way to go in the battle against the Covid-19 crisis. I wouldn’t be surprised to see them sink again, and not just on the back of heavy profit taking.
UK share markets have rocketed today thanks to a double-whammy of encouraging news. Firstly, Joe Biden’s US presidential victory has fanned hopes of a massive stimulus package for the Stateside economy. Secondly — and more significantly — Pfizer has announced its Covid-19 vaccine developed with BioNTech had shown a staggering 90% rate of efficacy.
Hold the phone
Great news, of course. And the explosion in investor appetite isn’t perhaps a surprise given the unrelenting gloom that’s marked 2020. But stock investors need to remain extremely careful right now.
There’s still a long way to go and a lot more testing to undertake before any vaccine becomes available. And so it’s too early to suggest that UK share markets have finally turned the corner following the 2020 stock market crash. I don’t want to be a party pooper but investors should be prepared in case of fresh financial market volatility.
A long economic downturn remains a very real possibility. And, as a consequence, the significantly price falls that many UK shares have endured this year could still be considered as wholly justified. Plenty of British stocks are cheap for a reason as their balance sheets face extreme pressure and their profits outlooks remain pretty murky.
Getting wealthy with UK shares
I’m not too worried about what could happen to UK share prices in the short to medium term though. As a long-term investor I know I can expect to make big returns on my invested cash. Those who buy UK shares with a view to holding them for a decade, or longer, make an average annual return of at least 8%, studies show.
I’ve kept buying despite the uncertain economic outlook for the next few years. I’ll go bargain hunting again should another stock market crash happen too. That way I can keep acquiring five-star stocks that have been unfairly, and heavily, sold off at dirt-cheap prices.
Sure, UK share markets are surging right now on that encouraging Covid-19 vaccine news. The FTSE 100 is putting in its best one-day performance since March. But there are still plenty of top-quality stocks that still look too cheap to miss following the spring market crash.
Huge question marks remain unanswered over the strength and the timing of the global economic recovery. But make no mistake. The economic rebound will happen, pulling share prices higher with it. And people who’ve kept investing in products like Stocks and Shares ISA will make a fortune in the process.
