Broader markets, including the FTSE 100 and FTSE 250 indexes, have rallied strongly after the crash back in March. Since early spring, they are both up around 22% and 33% respectively.
Yet many analysts agree that the global economy is still in poor shape. News of a potential second wave of Covid-19 regularly hits the headlines. A large number of people worldwide are looking for jobs, and firms are operating at reduced capacity. Thus the markets markets may not be able to ignore further headwinds in the coming weeks.
Another FTSE correction
There will almost certainly be another market decline in 2020. But it would be almost impossible to know the exact date when FTSE shares may take a beating again.
The rapid recovery of stock markets worldwide and FTSE shares, even without the development of a vaccine, has been confusing for many investors. But if there is a delay in the discovery, development, and mass production of a vaccine, it is likely that stocks will retreat in the autumn.
Another serious concern for most economies is the expensive Covid-19 stimulus packages that will bloat budget deficits and cause inflation. Furthermore, high unemployment rates need to be taken into account in the months ahead. According to the Institute for Employment Studies (IES) “unemployment [in the UK] has already risen to at least 2.5m, or from 3.9% to around 7.5% of the workforce.“
Let’s not forget the ongoing dispute between the world’s two largest economies, the US and China either. Finally, there’s also the upcoming US election in early November, which should bring further choppiness to the markets.
Likely opportunities in any market
In investing, risk and return go together. Whenever markets decline considerably in a matter of weeks, many investors wonder if they should sell and turn their paper losses into real losses. Each portfolio is unique and different investors have different risk/return profiles.
However, history tells us that markets tend to recover from losses, only to make new highs. Yet timing the market is extremely difficult, especially for the average investor. Therefore, even if there is another decline soon, I believe FTSE investors should stay calm and focus on their long-term financial goals.
With a bit of due diligence, investors can also find robust FTSE shares that may be appropriate for many portfolios.
Here are several companies I would consider buying, especially if there is any further weakness in their share prices soon. In the FTSE 100, they include AstraZeneca, British American Tobacco, Diageo, Flutter Entertainments, Ocado, and Smith & Nephew.
In the FTSE 250, I like Bellway, Dechra Pharmaceuticals, Greencoat UK Wind, Softcat and Tate & Lyle as potential long-term investments.
Foolish takeaway on FTSE shares
Many FTSE shares have largely been unattached to economics lately. However, shareholders could once again have their faith tested in the coming weeks if FTSE stocks retreat. In the short run, I’m expecting continued volatility in stock markets.
Making the right decisions in investing is not necessarily about constantly picking winning shares and funds. Rather it is about having a long-term strategy. So if you are unsure where to begin, a low-cost FTSE 100 or FTSE 250 tracker fund might also be appropriate.
Personally, I’m determined not to get caught up in any short-term selling in August, nor for the rest of the year.
tezcang has no position in any of the shares mentioned. The Motley Fool UK owns shares of Flutter Entertainment. The Motley Fool UK has recommended Diageo, Greencoat UK Wind, and Softcat. 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.