The stock market picks up one day, then falls the next. As I write, the FTSE 100 stands at a few points over 7,500. Is it just waiting to be set loose?
Even if share prices aren’t moving much, private investors are looking keen again. Stock market firms report growing signs of bullishness.
So, is everyone really waiting for the start flag to be waved before they pile into their favourite stocks?
Finance stocks
Investing services firm AJ Bell (LSE: AJB) has seen a 60% rise in capital inflows, and talks of increased investor confidence.
The firm produces quarterly reports, its Dividend Dashboard. They pull together the feelings of the City’s brokers, and they look positive.
Forecasts suggest a big earning rise from FTSE 100 stocks in 2023, with the finance sector out in front by a long way. You know, those trodden-down banks with their super low price-to-earnings (P/E) valuations and big dividend yields.
Hmm, it makes me think that investment firms themselves, like AJ Bell, might be good buys for the next bull run. Earnings forecasts look good, and the share price has only picked up a bit.
The P/E looks modest, especially if we’re in for a bull run. Yes, AJ Bell is on my list for further research.
The start?
So, FY reports season might kick things off. But we could also be in for a big signal, and it might be soon.
I keep seeing FTSE 100 headlines along the lines of “Stocks uncertain as traders await interest rate decision“.
Will UK shares rise when the Bank of England makes its first interest rate cut? Note that I say ‘when’, not ‘if’, as nobody really doubts it will happen some day.
I think so. A rate cut should make cash and bond investments less attractive, and make stock market dividends look that bit better. So why wait?
Inflation again
Saying all that, we bulls might still have a bit longer to wait. Inflation rose a bit in December, to 4%.
But it’s not an exact measure. And I think a busy Christmas period might have had something to do with it.
In the year ahead in general, I see a few reasons why the stock market could start to shine a bit.
Inflation is still on its way down overall, and a lot better than last year. The property market is showing green shoots too, with house builders optimistic about the start to the year.
The bears
Now, there are some commentators out there who think 2024 will bring another stock market slump. In fact, only today I saw someone calling a 20%+ crash.
That’s talking about the US, where stocks might look a bit hot. I can’t see UK stocks, on lower valuations, falling like that. Still, a US crisis would almost certainly hit the FTSE too.
Anyway, what counts is not when the stock market might rise, but whether UK shares are cheap. And if we think they are, we sould buy them, right? And surely not wait for someone to fire a starting gun.
