The FTSE hasn’t been the greatest performer in recent years. Issues such as the pandemic and Brexit have played their part in fuelling uncertainty.
However, there’s hope that the UK stock market will begin to show signs of recovery in 2024 and beyond. And I plan to capitalise on the opportunity to catch shares while they’re on the up.
Granted, the recent performance of the FTSE may not fill investors with confidence. But I reckon this actually offers an opportunity to build wealth.
The American dream?
It seems if I’d put my money into the S&P 500 five years ago, I’d be a lot happier than if I opted for the FTSE 100. Over the five years, the US-leading index has returned 81.6%. The FTSE 100, on the other hand, is up a meagre 9.7%.
The last year paints the same picture. In the previous 12 months, the S&P 500 is up 20.4% versus a 3.9% loss from the FTSE 100. For UK investors, that’s disappointing. Of course, this doesn’t consider dividends.
But I think the UK is primed for growth in the years to come. And the best time to buy is when shares look dirt cheap, right?
According to forecasts, the UK will be Europe’s best-performing major economy in the next 15 years. That means it will outperform the eurozone’s big four economies (France, Germany, Italy, and Spain). That’s impressive.
In the near term, we’re also set to see interest rates drastically fall over the next three years or so, which will massively boost investor sentiment. With that, I think the years ahead have the potential to be exciting.
Time to go shopping
As such, I’m going shopping. Across both the FTSE 100 and FTSE 250, I see bargains. As I write, the former trades on just 10 times earnings. But there are a few shares that pique my interest.
An example is Scottish Mortgage Investment Trust (LSE: SMT). It’s been a whirlwind few years for the stock. I’m hoping in the times to come it’ll be able to reach the £15 highs we saw in 2021.
Right now, the trust is trading at a 6.9% discount to its net asset value. Essentially, that means I can buy the 99 companies in its portfolio for less than their market rate. I like the sound of that. There are other perks to owning the trust too, such as the diversification it provides my portfolio.
Its focus on growth stocks may see it continue to suffer in the short term. That’s because these firms use large amounts of debt to fuel growth. Higher interest rates increase the cost of capital for these businesses. During these times, investors tend to steer clear of these investments, instead favouring safer alternatives.
However, as interest rates fall, I’d expect these companies to thrive. As such, I’m eyeing the trust for my portfolio. With that, it’s exactly opportunities like Scottish Mortgage that I’ll continue to leap on if I have any investable cash. My plan is to keep buying cheap FTSE shares in 2024 and beyond!
