If you’d have asked investors in Lloyds Banking Group (LSE: LLOY) earlier last week whether they were satisfied with the stock’s performance in 2021, I’d imagine many, if not all, would have said yes. The Lloyds share price has risen by over 30% year-to-date, as the bank produced a strong recovery from the Covid-19 pandemic.
However, news emerging last week of a new Covid variant sent the stock plummeting. It fell over 7% on Friday alone. So, as we near the end of the year and brace ourselves for 2022, will its share price recover? And does this fall in price present an opportunity for me to buy shares? Let’s take a look.
The Lloyds share price so far
2021 has seen a slow and steady rise in the bank’s share price. The stock entered the year trading at around 35p, after tailing off from its impressive surge in December 2020, at one point nearly breaking the 40p barrier. Eventually breaking the 40p mark back in March, since then the stock is up over 10%. More recently, it has even surpassed the 50p threshold at times – but has failed to retain a position there. My colleague Cliff D’Arcy also recently stated he could see the share price hitting 60p in 2022. Yet, as the FTSE 100 fell over 250 points on Friday due to the news regarding a new strain of Covid-19, the recent gains we have seen by the Lloyds share price were reversed.
So, where next for Lloyds?
Well, this depends on a few factors. Firstly, there is a Bank of England meeting on 16 December that will decide whether there will be a rise in interest rates. With inflation up to its highest level in a decade, a rise — you’d expect — is likely. This would boost the profits the bank makes from lending and could put the share price in a position to start 2022 strongly.
It is further dependent on economic growth within the UK. If the UK can continue its strong economic recovery, Lloyds will thrive from this. What is of major concern to me, however, and has been seen in the past week, is the potential for rising Covid-19 cases as new variants are found. The gruelling winter months we are approaching will only worsen these impacts, and a rise in cases could dampen the UK economy. The emergence of a new variant shows just what impact Covid can have on the market.
Would I buy?
What happens in the rest of 2021, whether it be rising interest rates or Covid cases, will have a large influence on where the Lloyds share price heads next. If the UK manages to keep coronavirus cases down, I think the shares will enter 2022 in a solid position. What is impacting my bullish outlook on Lloyds is the likelihood of Covid cases being kept to a minimum. The government has previously stated that there would be no winter lockdowns, but Boris Johnson’s announcement over the weekend could be the start of the reinstatement of restrictions. If this is the case, I’d expect the share price to fall further as we head into the new year. As such, while I like Lloyds, I will be holding off from buying for now.
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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.