Are we about to see a once-in-a-decade opportunity to buy cheap UK shares?

Risks of recession are rising. Are UK shares about to fall further? Our writer considers if there’s an investment opportunity coming up for his ISA.

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The FTSE 250 contains multiple mid-cap shares that tend to be more closely linked to the UK economy than the more internationally-focused FTSE 100. And so far this year, it has fallen by 16%. Could UK shares fall much further and if so, what should I buy?

Rising prices

First, let’s consider why share prices have fallen. Inflation seems to be the main culprit. Prices are rising sharply and the Bank of England indicated that inflation could reach 10% by the end of the year.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

So why is that a problem? Well, higher energy bills, food prices and fuel costs all have a negative effect on our disposable income. And when we spend less elsewhere it causes economic growth to weaken. There’s now a risk of a major economic slowdown later this year.

Could UK shares fall further?

Share prices are forward-looking and try to anticipate economic conditions several months ahead. UK shares have already taken a tumble this year, but they could still fall further.

Although not guaranteed, it’s certainly possible that a recession in the UK could last longer or be deeper than City analysts expect. There are many, uncertainties including Russia’s war in Ukraine and Covid measures in China disrupting supply chains.

If UK shares fall further, I’d see it as an opportunity to buy quality shares at a discount. I’d treat it just like the winter sales! History shows long-run stock market returns tend to be favourable.

For instance, over the past decade, the FTSE 250 produced an average return of 9% per year. That means if I invested £10,000 a decade ago, I’d currently have around £23,000.

Of course, that doesn’t mean I’ll definitely achieve the same in the coming years. But if UK shares fall further, it could raise my chances to capture a double-digit annual return. The Covid crash of March 2020 was certainly one of the opportunities. UK share prices are currently a whopping 50% higher than they were then.

Which UK shares to buy?

I could buy a UK-focused exchange-traded fund (ETF). Or with a bit of homework, I could pick and choose some quality shares that I think could perform well. To do so, I’d consider some words of wisdom from legendary investor Warren Buffett.

It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” I’d add that buying a wonderful company at a wonderful price would be even better.

But what makes a great company? One attribute that high-quality companies tend to have in common is their return-on-capital-employed (ROCE). It shows how efficiently a company can turn its capital into profits.

My research suggests some examples of quality UK shares currently include Games Workshop, Greggs and Domino’s Pizza. All three are profitable, cash-generative and even offer an average dividend yield of 3%.

I’d consider buying all three shares for my Stocks and Shares ISA today. But if their share prices were to fall over the coming months, I’d be even happier to pop them in my portfolio.

Inflation Is Coming: 3 Shares To Try And Hedge Against Rising Prices

Make no mistake… inflation is coming.

Some people are running scared, but there’s one thing we believe we should avoid doing at all costs when inflation hits… and that’s doing nothing.

Money that just sits in the bank can often lose value each and every year. But to savvy savers and investors, where to consider putting their money is the million-dollar question.

That’s why we’ve put together a brand-new special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation…

…because no matter what the economy is doing, a savvy investor will want their money working for them, inflation or not!

Best of all, we’re giving this report away completely FREE today!

Simply click here, enter your email address, and we’ll send it to you right away.

Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK has recommended Dominos Pizza and Games Workshop. 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.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

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