What’s with all the gloom? Investors are wasting time fretting about the bond meltdown, stock market dip, Bitcoin, Brexit, you name it. Ignore these crashing bores! It is natural to feel anxious in the later stages of the second longest bull run in history, but do not let this affect your judgement. There are some great opportunities right now and believe it or not, the UK is high on the list.
Yes I know we could end up crashing out of the EU just as inflation and interest rates soar, and the greatest bear market EVER kicks in. All that might happen, it might not. Nobody knows. But you cannot build your portfolio based only on worst-case scenarios, as you will miss the best that stock markets have to offer.
Here is one piece of news you may have missed during the current flurry of panic: profits at UK plc have hit a record high, thanks to strong global growth.
You heard that right. UK-listed companies reporting annual results between October and December saw sales and profits hit record highs, according to the latest Profit Watch UK from The Share Centre. Revenues jumped by 12.6% to £126.6bn, a new record for the latest group of companies to report results.
Watch those profits
Pre-tax profits leapt 44.8% to a new record of £11.2bn, with nine out of 10 companies posting an increase. FTSE 100 companies, which generate three-quarters of their earnings overseas, have done particularly well as they tap into buoyant global growth. Their pre-tax profits jumped by more than half, far faster than the domestic-focused mid-caps, but their profits still grew by nearly a third.
Investment research analyst Helal Miah said that even without exchange-rate gains, UK plc would still have posted record-breaking results. He expects more good news in 2018 due to continued global strength, even though the boost from the weak pound will dissipate: “With the wider global economy in great shape, multinationals will profit from strong trading conditions in their overseas businesses, and manufacturers and exporters will enjoy rising demand for their goods.”
Companies that depend on domestic consumer demand are most likely to underperform, as real incomes continue to fall, he added. But overall, it is a hugely positive picture, and greatly at odds with the prevailing negative sentiment.
It also adds to my view that current market volatility is a major buying opportunity, exactly the ‘crash’ stock markets needed. I see it as further evidence that stock markets are a great way to build your wealth, especially as dividends hit an all-time record high in 2017.
At time of writing, the FTSE 100 stands at 7,212, more than 7% below its all-time high, which gives you an opportunity to jump in at a discount. It could easily fall further, of course, but you will never buy at the exact bottom of the market. Despite the recent dip, the index is still up 10.4% over one year and 44.7% over five years. It currently yields 3.9%, thrashing cash. The UK is in good shape. Do not let the doomsayers convince you otherwise.
Harvey Jones has no position in any of the shares mentioned. 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.