The UK stock market has not seemed like a very rewarding place to be at some points over the past few years.
On one hand, the flagship FTSE 100 index did hit a new all-time high last year. On the other hand, lots of British shares seem to be in the doldrums.
From my own portfolio for example, British American Tobacco is 10% cheaper than five years ago and trades on a price-to-earnings ratio of just six. Vodafone has more than halved in five years and has a dividend yield north of 11%.
Could things be about to get worse? Or might the London market come storming back in 2024?
Market timing
The truth is, nobody knows. What happens next in the stock market is always a matter of conjecture not fact.
That said, I think the past few years are instructive. Many London-listed companies have done fairly well commercially. Yet share prices have fared poorly, due to concerns about the economy and an increasing sense that the London market is not the magnet for international investors it once was. Those factors could change in 2024 but I would be surprised if they did.
So while I think the stock market could yet have a good year, if it came roaring back in a big way I would be surprised.
Long-term view
In fact though, I think that could be good news. That may seem surprising. Sometimes people think that a booming stock market is what investors want.
The reality is more nuanced though. Traders may like short-term jumps in share prices. But as an investor with a long-term perspective, low prices are not necessarily a bad thing in my book. They can help me buy into a company at an attractive price.
On top of that, a firm’s share price also helps determine the dividend yield I earn if I invest in it. That massive Vodafone yield has not emerged because the company has raised its dividend in recent years. Rather, it reflects the falling share price.
Making a plan for 2024
So I am not spending much time thinking about the prospect of a stock market boom in 2024.
By the same measure, I tend not to think much about a stock market crash, although I do spend time considering what shares I might want to snap up if they are suddenly on sale at a much lower price than today.
What I am doing though, is trying to take advantage of some of the compelling bargains I already see in the market, when I have spare cash to invest.
To that end, I continue to spend time identifying what I see as promising businesses with share prices that do not reflect their potential, in my view. By doing that, hopefully I can build wealth over the long term.
