No Santa rally? As the UK stock market plunges 3%, I’m hunting for bargains

Global stock markets are in turmoil as Christmas approaches but our writer is keen to grab some bargains while prices are low.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

A Santa rally is a phenomenon where stock markets often rise in December as investor optimism increases towards year-end. However, it seems this December has bucked the trend, with most FTSE indexes down by around 3%.

The troubles didn’t start there though.

A brief rally in late November failed to recover losses after the October budget. Then, a perfect storm of mitigating factors stopped any further growth in its tracks. Supply chain issues, takeover bids and rising energy costs strangled any hopes of recovery.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Last week’s hawkish tone from the US Federal Reserve didn’t help matters, suggesting fewer interest rate cuts next year than expected. The ripple effect of tighter US monetary policy was a punch in the gut for global markets.

Hope on the horizon

Not everything about the dip is negative. Some of the decline can be attributed to a strengthening British pound, which weighs on UK-listed exporters by making products pricier overseas. And with UK government bond yields rising, investors are shifting focus away from equities. 

That looks bad in the short term but suggests bigger factors are at play.

As the saying goes” “It’s always darkest just before dawn.” Could this dip be an early suggestion of a 2025 rally? 

There’s a chance the slowdown could lead to a stronger recovery next year. If global demand picks up – particularly from major trading partners like the US or China – export-driven sectors in the UK might benefit.

Considering markets are forward-looking, I think the US Federal Reserve and Bank of England are being overly cautious. If recent inflation proves transitory, interest rate cuts in 2025 could be back on the table, helping to boost equities.

One stock I’m bullish on

Created with Highcharts 11.4.3JD Sports Fashion PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Down 43% since 1 January, JD Sports Fashion (LSE: JD.) is the worst-performing stock on the FTSE 100 this year. It’s faced challenge after challenge in 2024, including a volatile trading environment and adjusted profit expectations.

But a recovery may be on the cards, meaning the current low price could present an excellent opportunity.

Why? For one, it’s been actively expanding its global footprint through strategic acquisitions. 

It recently made huge inroads in the US, acquiring sports business Hibbett for over $1bn. The move promises to significantly strengthen its presence in the American market. This adds to several European acquisitions made last year, including French retailer Courir. 

These acquisitions should enhance its market position and diversify its revenue streams. But they come with risks.

The purchases were costly, bringing the group’s debt close to £1bn. If they don’t perform as expected, it would be a black mark on the balance sheet. Supply chain disruption and fluctuating exchange rates are key areas of concern. A weakened set of final-year results could hurt the price further.

Yet despite the falling price, recent performance has been good. In its third-quarter trading update for the 13 weeks to 2 November 2024, gross margins increased 0.3% while delivering 5.4% organic sales growth and 10.4% organic revenue growth in Europe. It opened a further 79 new JD stores globally and expects full-year profit to be within the guidance range.

I believe the potential for a strong recovery makes it a stock well worth considering, which is why I recently bought some of the shares.

5 stocks for trying to build wealth after 50

Inflation recently hit 40-year highs… the ‘cost of living crisis’ rumbles on… the prospect of a new Cold War with Russia and China looms large, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

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.

Mark Hartley has positions in JD Sports Fashion. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Dividend investors! Here’s what Warren Buffett says builds wealth in the stock market

Reinvesting dividends at yields of 8% or higher looks like a good way of building wealth. But Warren Buffett has…

Read more »

Calendar showing the date of 5th April on desk in a house
Investing Articles

Here’s my Stocks and Shares ISA plan for 2025-26

A Stocks and Shares ISA helps investors avoid taxes on dividends and capital gains. And Stephen Wright has a plan…

Read more »

Dividend Shares

Of the 20 highest-yielding FTSE 100 stocks, this is my top pick

This FTSE 100 stock currently offers a yield of 6.4%. But Edward Sheldon believes it’s capable of providing share price…

Read more »

Investing Articles

Could Tesla’s share price jump over the next 12 months? These analysts think so!

Tesla's share price has fallen by almost a third since 1 January. But optimism is high that Elon Musk's company…

Read more »

Investing Articles

I asked ChatGPT where the FTSE 100 will be in 6 months: here’s what it said…

Let’s be realistic, ChatGPT can’t predict the future. But it did do a good job of compiling data from brokerages…

Read more »

Investing Articles

Could the Rolls-Royce share price hit £10?

The Rolls-Royce share price has taken most analysts by surprise with almost everything going right for the British engineering giant.

Read more »

Investing Articles

4 REITs Fools own for passive income

REITs often have higher-than-average dividend yields compared to other stocks, making them a solid choice to consider for passive income…

Read more »

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »