The Motley Fool

100 billion reasons why I’d buy FTSE shares now

The lockdowns have weakened the UK economy. Along with most other countries, we now face a recession because GDP plummeted. But I reckon now’s a good time to invest in FTSE shares.

We may not feel like investing now, though. After all, ongoing social distancing measures are making it hard for some companies to build up their revenues again as the lockdowns ease. Particularly in the retailing sector, higher costs and lower revenues — because of restricted footfall — are squeezing profits.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Resourceful businesses back FTSE shares

But businesses are resourceful. Anecdotally, I’d observe that some retailers are raising selling prices to fight profit attrition. But the over-riding factor that keeps me confident about investing in FTSE shares for the long haul is the way the government seems determined to fight economic weakness. Right now, I can see 100 billion reasons to get involved! Let me explain…

On Wednesday 17 June, the Bank of England’s Monetary Policy Committee (MPC) voted to continue its programme of quantitative easing. That sounds technical, but it just means pumping new money into the economy to keep things moving. In other words, the government is doing everything it can to stop the economy crashing. And, in the short term, that’s good for shares.

Indeed, the central bank will continue the existing £200bn programme of UK government bond and sterling non-financial investment-grade corporate bond purchases. But, on top of that, the MPC voted to increase the programme with an additional £100bn. And, to me, that’s a 100 billion good reasons to keep on investing in FTSE shares!

The target for UK government bond purchases is an eye-popping £745bn now. And the Bank of England will finance it by issuing central bank reserves. I love that little word ‘issuing’. It essentially means ‘printing money’ and if we could all do that when we feel like it our personal finances might be in better shape – at least for a while.

A good place to be

The central bank explains the process of quantitative easing as “a tool that central banks, like us, can use to inject money directly into the economy.”  Sounds great! The bank goes on to say, Quantitative easing involves us creating digital money. We then use it to buy things like government debt in the form of bonds.”

However, as neat as it sounds, like all ‘medicines’ there are side effects. For example, it stokes up inflation. And all the extra money sloshing about can create asset bubbles. On top of that, it can exaggerate boom-and-bust business cycles, among other things.

But, as I mentioned earlier, businesses are resourceful. And holding FTSE shares may be a good place to be if inflation gathers pace. That’s because underlying businesses can raise selling prices to maintain their profitability. On top of that, shares are one of the asset classes that could benefit from the upward pressure quantitative easing tends to place on assets. In a positive note, the Bank of England reckons it’s seeing improvements in the economy and has slowed the pace of asset purchases from where they were in the spring.

The outlook for the economy remains uncertain, but I’d much rather be holding shares right now than I would cash savings.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Kevin Godbold has no position in any share 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.