The prospects for the FTSE 100 seem to be worsening every day. The index has now fallen by around 35% since the start of the year, and there appears to be no end in sight for its decline.
However, previous crises have caused the same feeling among investors. Often, it’s difficult to see how the stock market will recover from the challenges it faces. But the FTSE 100 has achieved that goal in every previous bear market, and is likely to do so again this time around.
As such, now could be the right time to buy high-quality stocks while they trade on low valuations. Here are two prime examples.
Emerging market-focused bank Standard Chartered (LSE: STAN) has recorded a 37% decline in its share price since the start of 2020. Its performance in the current financial year looks set to be negatively impacted by the coronavirus. This may mean its forecasts are downgraded over the coming months.
Investors seem to be pricing in potential challenges for the business. For example, it trades on a price-to-earnings (P/E) ratio of just 7.5 and has a dividend yield of 5.4%. This suggests it offers a wide margin of safety, as well as long-term recovery potential.
Clearly, Standard Chartered’s stock price could move lower in the near term. The full effect of the coronavirus on the world economy’s performance is a known unknown. But its recent fourth quarter results highlight the progress being made by the business in areas such as productivity and its digital operations.
Therefore, investors who can live with the prospect of further volatility in the short run, in return for growth potential in the long run, may wish to buy a slice of the bank today.
Standard Life Aberdeen
Another FTSE 100 stock which has experienced weak investor sentiment in recent weeks is Standard Life Aberdeen (LSE: SLA). The asset management company’s shares have declined by 43% since the start of the year, with falling stock markets across the world likely to contribute to difficult trading conditions for the business.
Of course, Standard Life Aberdeen made strong progress in a number of areas in 2019. Notably, its investment performance improved, which is likely to strengthen its market position over the long run. It also entered into new partnerships to expand its product offering and customer base. They could increase the size of its growth opportunities in the coming years.
With the stock now having a dividend yield of 11%, it seems to offer a wide margin of safety. Dividend cuts cannot be ruled out. Likewise, the company’s shares could continue their downward trend in the coming months. But, over the long term, the stock could offer recovery potential after what has been an extremely challenging first quarter of 2020.
It’s ugly out there…
The threat posed by the coronavirus outbreak has spooked global markets, sending stock prices reeling.
And with the Covid-19 virus now beginning to spread beyond of China and Italy, it seems very likely that the bull market we’ve enjoyed over the past decade could finally be coming to an end.
Against such a backdrop of market worry, it’s little wonder that many investors are starting to panic. (After all, nobody likes to see the value of their portfolio fall significantly in such a short space of time.)
Fortunately, The Motley Fool is here to help, and you don’t have to face this alone…
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Peter Stephens owns shares of Standard Chartered and Standard Life Aberdeen. The Motley Fool UK has recommended Standard Chartered. 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.