I believe a number of issues impacting markets have made FTSE 100 shares unmissable. Low valuations, as well as the potential for a bull run once the fog of macroeconomic issues dissipates, have me excited!
Why are FTSE 100 shares struggling?
The current downturn can be traced back to the pandemic, in my opinion. This is when most markets across the world tumbled. Since that time, there have been issues and events one after the other that have prevented a bull run or any market stability.
Since the pandemic, we’ve hobbled along into macroeconomic turmoil. This, of course, is the high inflation and interest rate environment economy we find ourselves in. Unfavourable by-products of these issues are a cost-of-living crisis as well as recession fears and a supply chain crisis.
Finally, government budgets. Yes, I’m referring to THAT disastrous mini-budget of last year, and Brexit implications haven’t helped. From a Brexit perspective, I believe the UK does not appeal to foreign investors as much due to economic uncertainty. Additionally, the tragic events in Ukraine haven’t helped FTSE 100 shares or worldwide markets.
How I’m approaching the stock market
One of my main aims is boosting my passive income. For this, I’m looking at stocks with enticing yields and consistent payouts. I do understand that dividends are never guaranteed.
There are a number of FTSE 100 shares that could fulfil my passive income aims. I’m bullish on Vodafone (LSE: VOD) shares. It is one of the world’s biggest telecoms businesses with exposure to emerging markets, such as Africa, and I think it can provide me with decent returns and potential growth in the future too. The shares look cheap on a price-to-earnings ratio of three and a dividend yield of 9%. However, Vodafone’s debt level could hinder payouts. Debts are harder to pay down when interest rates rise, like now.
I’m a firm believer of diversification in life and investing. I’ve mentioned a telecoms business I like and I already own shares in a number of real estate investment trusts (REITs). These are property businesses that must return 90% of profits to shareholders.
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I’m also looking at other major sectors, like banking and grocery retailers. This is because some FTSE 100 shares have defensive capabilities. For example, with grocers, no matter the outlook, everyone has to eat.
I like the look of Tesco (LSE: TSCO) shares. Tesco is one of the biggest supermarkets in the UK. It has recently streamlined its operations and looks decent value for money on a price-to-earnings ratio of 12. This should drop in the future if its positive forecasts come to fruition, although this is never guaranteed. The current ratio is lower than the FTSE 100 average of 14. An issue that Tesco has to overcome is that of food inflation. Rising prices could lead its customers to alternatives, which include budget retailers such as Aldi and Lidl, which are already quickly capturing UK market share. This could hinder Tesco’s performance and payouts.
I’ve got a list of FTSE 100 shares I’m looking to buy when I have the spare cash to do. I’ve mentioned a couple above, and what I’m trying to achieve. Once the current opportunity passes me by, I believe it may not occur again for a number of years!
