Are FTSE 100 stocks in for a new bull run in 2023? I see signs that we might be in for just that.
Stocks have been held back mainly by the economy. It’s all about supply chain problems pushing up prices, meaning weak profits. Then there’s inflation, which leaves us less cash to buy shares with.
But big investors might just be waiting for things to change before they pile back into shares.
High inflation
Inflation in March fell a little, but at 10.1% it was still worse than hoped. That’s led to calls for a new interest rate rise, in May.
But there’s got to be more to it than that.
First up, when we talk about year-on-year inflation, we can only really get the long-term picture a year and more from when the biggest rises kicked in.
And we’re really only just getting there.
Some retailers, like Tesco, are already seeing wholesale inflation easing, and are pushing their suppliers to cut prices. Some things, like milk, are already down.
It can take a few months for costs further up the supply chain to feed through to retail prices. But as soon as that starts, it could be the green light for stocks.
Stock upturns
I see more signs that big City investors could pump their billions back into shares in 2023. And one of them is the gains we’ve had from all kinds of stock prices in the past month.
That’s in spite of the fear and gloom that seems to send the FSTE 100 up one day and down the next. And it goes against fears of weak earnings this year.
The Footsie itself is once again close to the 8,000 point level. The sharp dip we saw in March didn’t last long.
We’ve seen some bank stocks move up too. And I think bank shares could make up the heart of any bull run.
Consumer confidence seems to be on the way back up, going by recent surveys. That’s even with the latest inflation rise. Is that a bit of sun I see peeking through the storm clouds?
Dividend growth
Dividends give me the biggest hint. According to the latest Dividend Dashboard from AJ Bell, the FTSE 100 will hand out a bit less cash for 2022 than previously hoped.
But that’s where the bad news ends. The City seems to think dividends from the top index could reach £84.8bn in 2023. It’s close to the all-time record of £85.2bn set in 2018. And that was in the days before Covid, before high inflation, and before the war in Ukraine.
It seems that UK firms might be doing a fair bit better than gloomy stock buyers might think.
I mean, if they can make the cash to pay out big dividends, the share prices must follow in due course, mustn’t they? I don’t see what else they can do in the long term.
Now, the economy has made chumps of many of us in the past. And my upbeat outlook might just be wishful thinking.
We’ll see by the end of the year.
