The Lloyds share price is falling again! Should I take advantage and buy?

After a short recovery, the Lloyds share price is now falling again, but could this be a good time to snap up shares in the lender?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Lloyds (LSE: LLOY) share price has been falling again over the past week. Shares in the lender have declined just over 3% since Monday. It appears that concerns about the group’s exposure to the fragile UK economy are behind the decline. 

This decline is just the latest in a string of ups and downs. Over the past six months, the Lloyds share price has increased in value by around 25%. However, over the past 12 months, the stock is down 36%. Over the past five years, it is off 40% excluding dividends. 

Put simply, the bank has been a tough investment to hold over the past five years. But, with the outlook for the UK economy improving, should I make the most of the latest decline and buy the shares? 

Is the Lloyds share price on offer? 

Shares in Lloyds tend to move in tandem with the UK economic outlook. As one of the country’s largest lenders, that’s understandable. If the economy starts to stutter, the bank will likely be one of the first businesses to report a decline in sales and rising loan losses. 

I think this is the reason why the Lloyds share price has been so volatile over the past half-decade. Brexit and the coronavirus crisis have been two challenging headwinds for the UK economy. As such, it has been difficult to predict what the future holds for the economy and the country’s largest companies. 

However, at least one of these headwinds has now been removed. Brexit has happened, and while some sectors have suffered from the changes, overall, the economy seems to have taken the changes in its stride so far. 

That leaves coronavirus. So far, the pandemic’s impact has not been as bad on Lloyds and its peers as initially expected.

Unfortunately, we won’t know the crisis’s ultimate impact until it’s over. That suggests to me that this headwind will continue to weigh on the Lloyds share price in the near term. 

Mixed outlook

It’s difficult to predict how Lloyds will cope in the world after the pandemic and over the long term. It’s impossible to tell what the economy will look like 12 months from now, and how quickly it will recover. 

Therefore, while the stock might look attractive after its recent declines, projecting future growth is almost impossible. That makes it difficult for me to say whether it is worth buying the stock today.

On the one hand, the Lloyds share price could be a great way to play the UK economic recovery. But on the other hand, if it is impossible to tell what the future holds for the UK economy, it is also impossible to say what the future holds for the bank. 

Still, I am cautiously optimistic about Lloyds’ outlook, but I am wary of the risks involved. So, I would buy the stock for my portfolio today, but it wouldn’t be a large position. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »