I believe now’s a great time to load up on UK shares. It’s a view widely shared here at The Motley Fool. I reckon the opportunity to buy many quality stocks at cheap prices following the 2020 stock market crash is too good to pass up on.
This doesn’t mean UK share investors shouldn’t be cautious as we move through the new year though. Indeed, a new Coutts report lays out several issues that could hamper the economic recovery. These comprise:
- Brexit trade bumps. According to Coutts, there “is still a lot of detail to be resolved” following the UK-EU trade deal signed in December. It describes the impact of non-tariff barriers like increased customs administration as unclear. And the bank notes that access for British services companies, including those involved in financial services, is yet to be concluded.
- A bumpy coronavirus recovery. Business will gradually return to normal as the Covid-19 vaccine is rolled out. But Coutts says that “the economic recovery won’t be smooth” as lockdowns could continue and leave “deep economic scarring.”
- Over-optimistic markets. Coutts says that much of the good news surrounding the economic recovery was priced in during November’s stock market rally. And this brings two possible risks. It says “markets may not have much further to go on the upside,” and that “even mild setbacks could cause markets to fall.”
- China–US tensions. The bank says a change of US President won’t end the “simmering rivalry” between the two countries. It reckons “most of the sore points that existed in 2016 – trade imbalances, intellectual property rights – remain unresolved.”
UK shares to soar in 2021!
There’s plenty of food for thought here. But none of these issues should stop UK share prices from rocketing this year, Coutts says. The bank believes “2021 will be positive for equities” as the economic recovery kicks in. It also says “we expect corporate earnings to rebound significantly and become the fundamental driver of asset prices.”
The bank’s trading activity in the second half of 2020 reflects its bullish opinion on this new year. It said that “in the second half of 2020 we reduced government bonds and added to equities,” focusing on what it describes as “economically sensitive sectors and regions that we believe are likely to benefit from an economic recovery.”
Coutts noted it improved its exposure to emerging market equities too, a segment it describes as “a stand-out performer” in 2020.
I’m still buying for my ISA
As Coutts says, there are plenty of economic and political factors that UK share investors need to consider. But it doesn’t mean I’ll stop investing in my Stocks and Shares ISA. Again, there are too many stocks trading much too cheaply to miss out on.
And there is plenty of information out there from experts like The Motley Fool to help me avoid the traps and get rich with top-quality stocks.
