What’s that you say, there might not be a 2024 stock market rally? How does anyone expect to get rich thinking like that?
Seriously, I don’t know if we’ll see a rally next year, but here’s the thing. If, every year, I predict the FTSE will rise next year, I’ll be right a lot more often than wrong. That’s just historical statistics.
And I think I’ll boost my chances by making my call in a year when UK stocks are in the dumps. Like this year, right now.
Cheap Footsie
I mean, the FTSE 100 price-to-earnings (P/E) ratio is only about 10.5 (depending on who we ask). That’s a fair bit below its long-term average of around 14 to 15.
And analysts expect top-tier UK shares to pay out a record amount in dividends in 2024. FTSE 100 ordinary dividends could smash through £90bn, if they’re right.
When it comes to earnings growth, they reckon the financial sector will lead the way. You know, the depressed financial sector that has Lloyds Banking Group on a P/E of only 6.3, and Barclays on just 5.0.
Rally in 2024?
Don’t think there’ll be a rally next year? I don’t see how there can’t be.
Well, to be fair, I have been wrong before. And I guess we could suffer from the effects of inflation and high interest rates for some time yet.
Even when those start to fall significantly, there could still be quite a lag before consumer spending gets back on track, economic growth resumes, and share prices head on up again.
So, if the UK stock market doesn’t climb in 2024, I’ll make another prediction this time next year.
Being upbeat
But, the real point is that share prices tend to rise over the long term. They’ve been doing it in the UK for well over a century now.
So it makes sense to invest as if the stock market will rise next year, doesn’t it? If, instead, we invest as if we’re heading for a crash… we’ll get it wrong a lot more often that right.
And we could end up in retirement, lying on a lumpy bed stuffed with a bit of cash and a few gold coins, while watching all our friends enjoying the fruits of their burgeoning Stocks and Shares ISAs.
One strategy
I don’t have different strategies for a stock market rally or a stock market crash anyway. I like to buy top FTSE 100 companies that generate lots of cash over the years, and pay me good dividends.
So I buy based on dividend yields, cover by earnings, and stock valuation measures. There’s nothing in my strategy about price charts, or which direction the stock market is moving.
FTSE where?
FTSE 100 heading for 8,000 points? I don’t care if it’s eight points, or eight million points. All that matters to me is the valuation of my shares.
And if there’s a stock market rally coming, I want to buy as many as I can, cheaply, before it gets here.
