The FTSE 100 has been weak this year, after years of pretty much the same. But that might just be changing.
I’m no good at timing the stock market, but I am convinced of one thing. The dark and gloomy mood will lift, investors will get back to buying shares, and we’ll see a new bull run.
Why do I think all that? Well, I’ve seen a good few crises hit the UK stock market in my time. And what I just described is exactly what happened after every single one of them.
Signs of optimism
I’ve seen signs of optimism building for a while. But it can take a long time for investors to get past their fears and risk their cash in the markets again.
Sometimes, though, a single event can tip the balance. And we might have just had one.
Inflation for June has come out better than expected. Year on year, prices rose 7.9% in the month. That’s still a lot, but it’s better than the 8.7% we saw in May.
It raises hopes that the Bank of England might not go for more big base rate rises now. And that should help mortgage costs.
Mortgage costs
In fact, it’s happened already. According to financial information service Moneyfacts, mortgage deals just got cheaper. Only a bit, but it’s a start.
Some of the doom merchants were predicting 25% to 35% falls in house prices in the next few years if rates stayed so high. But they’re surely not going to, at least not for long.
At the time of writing, the FTSE 100 is up 3% in the past week. It’s way too early to tell if the gains will hold, mind.
Cash returns
But things look good for the stock market, to me anyway.
Forecasts show the banks leading the way with earnings rises in 2023, and they have some of the best dividend yields too. In fact, this year looks like it could be the third best year ever for cash returns from the FTSE 100.
According to investing firm AJ Bell, If we add up forecast ordinary dividends and share buybacks already announced, it comes to £122bn. And there could be more buybacks to come, and maybe even some special dividends.
Buybacks
Who’s behind all these big buybacks?
Looking to see which FTSE firms have bought up their own shares so far this month, I see Tesco, Centrica, BP, Shell, HSBC Holdings, Aviva, Lloyds Banking Group, and many more.
They’re some of our most reliable stocks for long-term dividends too.
Best time now?
Sir John Templeton, one of the world’s all-time investing greats, once said: “The best time to invest is when you have money. This is because history suggests it is not timing which matters, but time.“
So if I have money to spare, it goes into my Stocks and Shares ISA. And I don’t care what the FTSE 100 is doing.
But I really do think 2023 could turn out to be the best year to buy shares for a decade or more.
