I was surprised by what the FTSE did in response to that mutiny thing in Russia. It didn’t do much at all, even though a civil war there could have been a major disaster.
Improving sentiment
In fact, the FTSE 100 has been quite robust all year. Though we’re in an economic mess, the UK’s top index is back around where it was before the pandemic.
It makes me think we could be heading past the pessimism now, and that’s my first bullish sign. Stock market sentiment looks to be returning.
In fact, the latest Investor Index survey found that investor confidence has reached its highest level since the pandemic.
And I’m hearing it all round me too. People who were scared of the stock market just a few months ago are asking me where I think the best buys are.
Earnings growth
Inflation might be hitting our pockets, but it looks like FTSE 100 companies could be on for a record year of profits this year.
The previous best year for net income was only last year, up at £146bn. But according to AJ Bell‘s Dividend Dashboard, analysts expect 2023 to smash through that and set a new high.
Now, the forecasts that go towards this conclusion are from earlier in the year. And inflation and interest rates are higher than most of us had expected by now.
Still, more than half of 2023’s profit growth looks like coming from banks and other financial stocks. And right now, the banks seem to be awash with cash. Every day, we see them buying back more of their own shares.
So, these forecasts are very much uncertain. But with rising dividend forecasts on top, I can see why the market might turn bullish.
Inflation fall
Inflation must fall, mustn’t it? We all know it has to come down sooner or later, though it is tending more towards later. And we don’t know how much pain there’ll be before price rises start to decline.
I suspect there’s a lot of cash sitting in other investments, waiting to get back into stocks and shares just a soon as we see the right signs.
I think that outlook is a mistake, mind. If I see a good value shares today and I have the cash to invest, I’ll buy them right now. I don’t need to wait for signs that the time is right. I think the time is always right to buy shares.
But big investing firms are always looking at the short term, and want to make their portfolios look good. And timing matters to them.
When inflation falls, that could be the trigger they want.
Does it matter?
Whether the FTSE ends the year on a high, or the gloom carries over to next year, shouldn’t really matter. At least, not for those of us in it for 10 years and more.
If I had my way, I’d actually like to see share prices stay low for few more years. Then I could buy even more shares while they’re still cheap.
