The annual Stocks and Shares ISA deadline is fast approaching, and this year there’s something rather splendid about the timing.
The FTSE 100 has had a bumpy start to the year, which means my favourite shares have fallen in price at the exact moment that I’m gearing up for a final push to load up my ISA.
Sadly, I won’t be able to invest anywhere near my full annual £20,000 allowance. I don’t have enough spare cash. Yet I want to use up as much as I can, and today looks like an unmissable opportunity.
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I’m looking to buy cheap shares
Global stock markets ended 2023 on a high after investors convinced themselves that central bankers would start slashing interest rates in March. That assumption always looked optimistic, and so it proved.
Consumer price inflation is proving stickier than many hoped. It climbed 10 basis points to 4% in December, and as we learned this morning (14 February), it stayed there in January.
Hopes of an interest rate cut next month have been dashed. We may have to wait until May or June at the earliest. Share values are likely to recover as the long-awaited first rate cut looms. I’m keen to buy before that happens.
FTSE 100 shares look cheap right now. The index trades are just 9.8 times earnings, where a figure of 15 seen as fair value. That’s way cheaper than the US, where the S&P 500 trades at a thumping 33.34 times earnings.
When share prices fall, yields rise. Today I can see a heap of dirt cheap FTSE 100 stocks with ultra-high yields that I’d love to buy.
Time to go shopping on the FTSE
One of them is mining giant Glencore (LSE: GLEN). It’s fallen a whopping 16.83% year-to-date, and is down 24.43% over 12 months.
Glencore has been hit by the bad news coming out of China, once the world’s most voracious consumer of metals and metals, but now feeling queasy following the $300bn collapse of property giant Evergrande Group.
Glencore’s copper, cobalt and coal production all fell last year, adding to the squeeze, while copper, zinc and nickel output costs rose. That makes it risky, but the board still reckons annual trading profits will come in at around $3.5bn, though, above its long-term guidance of $2.2bn to $3.2bn.
Better still, the stock trades at just 8.89 times earnings and yields 8.17%. That’s forecast to fall to 4.54% next year but I think the long-term outlook is positive. The only thing stopping me from adding Glencore to my Stocks and Shares ISA at today’s lowly valuation is that I already hold it.
This is just one example of why I think now is a good time to buy FTSE shares. They’re cheap, dividends are high, and when inflation is licked and interest rates finally fall, with luck they may finally start motoring. If I’m right, I’ll be glad I filled up my ISA today. It’s better than waiting until the recovery arrives, as then I’ll have to pay more for exactly the same companies.
