Surely UK shares can’t struggle in 2024 in the same way they have in 2023, right? I’m being optimistic and envisioning a better market outlook.
Let’s take a look at some scenarios that could prompt a market rally as well as a few of stocks I’m considering buying when I’m able to do so.
Macroeconomic and geopolitical shifts
It seems as though the government’s disastrous mini-budget last year sped up the macroeconomic turmoil we’ve found ourselves in recently. Inflation skyrocketed and interest rates have consistently risen too. Byproducts of these issues are a cost-of-living crisis, higher energy and food prices, as well as an uncertain housing market.
Inflation seems to be heading down towards the government’s target level of 2%. This has prompted analysts to predict that we could be at the end of the several consecutive interest rate hikes we’ve endured recently. If this were to occur, the economy would be on a much better footing and could send markets upwards. The housing market could begin to regain positive momentum and inflation in food and potentially energy prices could get us out of the current cost-of-living malaise.
Tragic events in Ukraine as well as the more recent conflict in the Middle East have also wreaked havoc. For example, Russia is one of the largest producers and exporters of fossil fuels. After invading Ukraine, sanctions from other countries not wanting to deal with the superpower spiked higher fuel costs. Like most people, I’m hoping for peaceful solutions in Europe, as well as crossing my fingers for a ceasefire and longer-term solution in the Middle East. Positive developments could also help global markets and investor sentiment generally.
Cheap shares available now
Vodafone has recently undergone a transformation to streamline operations and is focusing on growth avenues. This is one area I’m excited about. It’s looking to gain traction in the burgeoning African market, where telecom adoption is rising quickly. A price-to-earnings ratio of two makes the shares look dirt-cheap to me. One risk I’ll monitor is its debt burden. This could hinder its shares heading upwards as well as returns.
Aviva shares look seriously underappreciated and undervalued, in my eyes. Plus, it would make an excellent stock to boost my passive income with a dividend yield of 7.5%. Although dividends are never guaranteed, Aviva’s looks well covered by earnings. Plus, the shares look cheap on a price-to-book ratio of just over one. This is low compared to peers in its market. Any continued macroeconomic issues could see demand for Aviva’s non-essential insurance products dwindle. This could hurt performance and payouts.
National Grid is arguably the most defensive stock on the FTSE index, if you ask me. It owns and operates the electricity and gas transmission system in the UK. Everyone needs energy, and with no competitors, this monopoly should allow it to keep performance steady. A P/E ratio of five and a dividend yield of 5.5% make the shares an attractive option right now, in my view. Tightened regulation from the government could curb any passive income plus maintaining such a vital and extensive network of infrastructure could be costly too.
