Lloyds Banking Group (LSE: LLOY) shares have fallen 16% since their 52-week high in early February. And we got a bit of a hint why on Tuesday (24 March), when Bellway (LSE: BWY) shares plunged 17.5%.
With interim results, the UK housebuilder downgraded its full-year outlook. “The ongoing conflict in the Middle East heightens the risk of both inflationary cost pressures and an impact to customer demand, and we have already seen volatility return to the mortgage market,” said CEO Jason Honeyman.
Oil is soaring oil, inflation is almost certainly returning, and mortgage rates are beginning to rise. That’s a painful combination for companies building homes. And for Lloyds, whose business depends heavily on the mortgage market.
What to do?
I can see only one sensible reaction to a short-term shock like this. That’s to consider buying shares in housebuilders like Bellway. And mortgage lenders like Lloyds. In fact, that’s exactly what I’d want to do if I didn’t already have enough in Lloyds shares. And if I didn’t already have a stake in house construction too.
It can be tempting to load up on our favourite stocks when prices are down. Never mind what we already own, just pile in to cheap shares. But we still need caution. When stock markets are shaky and the FTSE 100 has hit a technical correction, I reckon we should still stick to discipline — and by that I mainly mean keeping our stock investments well diversified.
Rebound already?
Bellway still expects to deliver full-year underlying operating profit in the range of £320m–£330m. And that would still beat the £303.5m recorded for the year ended July 2025.
As I write the day after the results, Bellway shares are already on a 6.5% rebound. And Lloyds shares are up 3% at the time of writing. A 4% forecast dividend yield at Lloyds looks tempting too, especially as forecasts have it growing nicely in the next few years.
But what happened in the past 24 hours to lift the investor gloom?
Daily politics
Well, President Trump has been talking up his peace plan for Iran. And oil has backed down from over $100 per barrel again.
But I don’t think it’s too stretching to suggest following Donald Trump’s daily utterances might not mark the most rational investing strategy. What we long-term investors surely need to do is try to ignore daily politics, and get our heads round the long-term prospects of the stocks we’re interested in.
So, too cheap?
On that basis, I remain convinced that Lloyds and Bellway are good value now. The recent honeymoon period for banks is possibly over, mind. And it could be some time before we get back to the bullish mood we were seeing just a few weeks ago.
That means share prices could still be volatile, and I could be back to wondering when my Lloyds shares will finally be priced to recognise their long-term value. In the meantime, I’d say investors should consider buying on the dips — but maintain diversification.
