2024 stock market rally: a final chance for once-in-a-decade bargains?

The UK stock market’s up by double digits this year, but will this momentum continue? And is 2024 a last chance to capitalise on once-in-a-decade bargains?

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Being invested in the British stock market in 2024 has been immensely rewarding, so far. After years of lacklustre performance in the wake of rising inflation, momentum appears to have made a comeback. And, subsequently, the FTSE 100 is up by almost 11% since mid-January. And this figure jumps even higher to 13% when including dividends.

That’s almost double what the UK’s flagship index typically achieves in a whole year. And it’s the rally investors have been patiently waiting for. But what’s actually driving these spectacular gains? And could this surge be just the tip of the iceberg? Let’s take a closer look.

Profiting from a correction

Stock market corrections are a sustained downward slide in prices over many months, or even years. We’ve all had to endure this recently and, needless to say, it’s hardly a pleasant experience. But while the short-term can be quite gloomy, these events create amazing wealth-building opportunities.

In fact, the downward volatility created incredible bargains for some top-notch businesses – something that my Foolish colleagues have been pointing out over the last 18 months. And for those prudent in their investing choices, the rewards are finally starting to materialise, with the UK’s leading index trading near a new all-time high.

What’s behind the double-digit gains?

While there are many British businesses seeing their share prices move back in the right direction, the FTSE 100 continues to be driven by a small selection. Don’t forget, it’s a market-cap weighted index. And that means firms like AstraZeneca (LSE:AZN), Shell, HSBC Holdings, and Unilever have a massive influence on overall performance.

As it turns out, all four of these firms are making a comeback, climbing by 11.4%, 7.8%, 8.9%, and 11.2% respectively, since the start of the year. While some of this growth is undoubtedly from earlier mispricing, investors ought to spend time investigating what other catalysts are at play. Why? Because it might uncover an even bigger opportunity.

Take AstraZeneca for example. This year’s rally has been primarily fuelled by the tremendous success of its cancer drugs. Revenue from this division grew by a staggering 26% to over $5bn (£3.9bn). Consequently, management crushed analyst targets and forecasts and could be on track to continue doing so. After all, other drugs in its portfolio are also beating expectations. In particular, Farxiga (a treatment for diabetes and heart failure) netted almost $1.9bn (£1.5bn) in just three months!

Given these impressive results, management has rolled out its plan to increase the group’s total revenue stream to $80bn (£62.7bn) by 2030. That’s almost double what was achieved in 2023, suggesting that the growth opportunities at AstraZeneca are only getting started.

Balancing opportunity with risk

If AstraZeneca is successful in hitting its 2030 target, then this year’s rally could be set to continue. And since severe stock market corrections are pretty rare, it could be over a decade before we get another opportunity like this. Don’t forget, the last bull market lasted almost 15 years.

However, a lot of things have to go right for AstraZeneca is deliver on its upcoming milestones. The firm has vast financial and intellectual resources. But drug development remains notoriously difficult. And a failure in late-stage clinical trials for a new blockbuster drug could invite considerable volatility in the share price.

Therefore, as exciting as the growth opportunity may be, investors must stay disciplined and aim to keep their portfolios diversified.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca Plc, HSBC Holdings, and Unilever Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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