Three Fools outline their expectations for the stock market this year, and explain why they’ll be continuing to regularly buy shares in quality companies!
Oliver Rodzianko
2023 was a stagnant year for the FTSE 100. In November, the index had lost around 2% since the start of the year. I think 2024 may be the light at the end of the tunnel.
The UK inflation rate is expected to be around 2.5% in 2024 and 1.7% in 2025. UK interest rates could decrease in 2024 from 4.5% to around 3% by 2025.
I see these two factors alone as massive wins for my UK shares if they play out. Lower interest rates mean more borrowing for business growth. Lower inflation means a slowdown in price hikes and more affordable goods, driving consumer spending.
It’s going to take time for businesses and consumers to react to the new inflation and interest rate environment. For that reason, 2024 seems more like a runway than a take-off period.
There are current geopolitical tensions and global economic slowdowns in major economies such as the US and China. These could make 2024 less than stellar for British exports and UK companies with multinational operations.
I’m going to hold my British shares as usual throughout next year. I’ll also be buying more of the companies that are trading at a discount.
Charlie Keough
It’s been a tough few years for investors. But I always like to remain optimistic. That said, I’m not sure we’ll see the recovery we’re craving in 2024. Here’s my take.
First of all, let’s start with the positive. I see dividend shares continuing to be a solid play. They were a good bet this year and where share prices have fallen in recent times, dividends have risen. During 2023, FTSE 100 companies are expected to return around £80bn worth of dividends. Many expect this number to come in higher for 2024.
However, I’m not expecting much growth for UK shares. And while it looks like we’re over the worst of inflation, I’m still anticipating further market wobbles next year.
Although it seems that interest rates have peaked, uncertainty remains around their future path. Additionally, people’s pandemic savings are slowly depleting, and I think the impact of high interest rates could play out over the next 12 months. On top of all of that, a pending general election will no doubt further add fuel to the fire.
That said, I’m a Fool. Therefore, regardless of what 2024 has in store, with every stock I buy, I’ll be buying it for the years and decades ahead. There will be plenty of noise surrounding the stock market in the upcoming 12 months. I’ll be remembering my goals and staying disciplined.
Christopher Ruane
With the economy performing weakly, a lot of UK shares were trading at attractive valuations last year.
Indeed, some look dirt cheap given the underlying strength of the businesses, even if they have fallen out of fashion with many investors.
I think that could continue to be the case in 2024, offering some good opportunities for my portfolio.
In the short term, that might not seem exciting. After all, shares like Legal & General and British American Tobacco already looked cheap to me at the start of 2023 — yet have moved down even further in price since then.
As a long-term investor, however, I see the prospect of some UK shares continuing to trade at cheap-looking valuations as an attractive one.
It may take years, but at some point I expect an improved economy and renewed investor enthusiasm for the London market could help bring share prices more in line with the underlying value of the stocks in question.
However, in the coming year I expect at least some very good UK businesses will continue to sell at attractive prices. If I can find such bargains and add them to my portfolio to hold for the long term, I would be happy to.
Christopher Ruane owns shares in Legal & General and British American Tobacco.
