UK share markets have backed up in recent days as fears over the economic recovery have resurfaced. Buyers are thin on the ground as concerns over Covid-19 variants grow. But I for one don’t plan to stop adding British stocks to my Stocks and Shares ISA.
Buying UK shares that continue to struggle around their recent multi-year lows could help me make huge returns. I’m reminded of the significant bounceback which the FTSE 100 and FTSE 250 made in the years following the last significant stock market crash.
The Footsie more than doubled in value in less than a decade following the 2008 banking crisis. And over the same period, the FTSE 250 just about trebled in value. No wonder the number of people who made millions in financial products like Stocks and Shares ISAs ballooned during the last decade, then.
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Déjà vu?
Economic recoveries very rarely follow a straight line. And I think it’s possible that the bounceback this time around could be bumpy too as the Covid-19 crisis rolls on. Other issues like Brexit and revived trade wars could hamper the recovery, too. But that doesn’t mean that UK share prices won’t soar again over the next several years.
Indeed, with central banks adopting ultra-loose monetary policy again and more quantitative easing possibly coming down the pipe, there are clear parallels between now and the last bull market of the 2010s.
This explains why I’ve continued to buy shares in my ISA in recent months. As a long-term investor I’m not overly concerned over the exact timing of the economic recovery. I have faith that the global economy will recover strongly, as it has done following major macroeconomic and geopolitical crises in the past. Profits across UK plc will rebound as a result, and this will pull share prices higher again.
A UK share I’m looking at
Wizz Air (LSE: WIZZ) is one UK share I’m considering buying for my ISA for the new bull market. It’s true that the airline might suffer a slow earnings recovery if Covid-19 infection rates spike again. But I’m one of many who believe the low-cost airline has the financial might to overcome the problem of travel bans persisting long into 2021.
It seems that there’s strong pent-up demand ready to be unleashed from holidaymakers all over Europe. And Wizz Air will be able to ramp up capacity quickly to ride this opportunity. It’s why City analysts reckon the Hungarian airline will flip from losses in the outgoing financial year (to March 2021) to earnings in financial 2022.
There is a risk that Wizz Air’s share price could collapse if the Covid-19 crisis doesn’t begin to improve though. This UK share trades on a mountainous forward price-to-earnings (P/E) ratio of around 190 times for the upcoming fiscal year. Companies that trade on such high valuations are in particular danger of falling should their profits outlooks darken.
