Is 2025 going to bring with it a massive stock market crash? Nobody knows for sure, but I reckon it’s unlikely. One reason for my optimism is the weakness in American stocks through December.
US investors tend to be enthusiastic and that often leads to high-looking company valuations. But when the S&P 500, Nasdaq and the Dow Jones Industrial Average all ease, it’s like they’re letting off steam and reducing the over-valuation pressure.
Lacklustre UK markets
Meanwhile, there hasn’t been much of a Santa Rally for the UK stock market. The FTSE 100 and FTSE 250 have been doing what they often do well — move broadly sideways!
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We British seem so reserved and often focus intensely on company valuations. Perhaps that approach tends to reduce the number of speculative bubbles blowing up this side of the Atlantic.
Many UK companies still look like they have modest valuations. So that’s the main reason I’m not waiting for any stock market crash to arrive. Some shares appear to be on sale now, so I’ve been working on building my watchlist.
For example, TP ICAP (LSE:TCAP) in the FTSE 250 looks cheap against several valuation measures. But I’m most impressed by the chunky dividend. With the share price in the ballpark of 260p, the forward-looking yield for 2025 is around 6.2%.
There’s a multi-year record of dividend rises backing up that high shareholder payment. The financial company lowered the pay out in 2020 when the pandemic struck, but it’s come roaring back since.
However, financial firms are known for their cyclicality and that adds risks for shareholders. TP ICAP operates as an inter-dealer, energy and commodities broker. On top of that, it’s provides over-the-counter (OTC) pricing data. So it’s facilitating transactions between various financial institutions.
Meeting and exceeding expectations
The setup makes the business sensitive to economic shocks and trends. It’s also affected by currency volatility. The earnings record shows how the fortunes of the business cycle up and down. Prior to 2022 there was a series of annual declines.
Nevertheless, in November a positive third-quarter update arrived and the directors said trading had been in line with expectations. City analysts are expecting single-digit percentage increases for earnings and the dividend this year and next.
For the time being, the business looks settled and is advancing steadily. So I see the stock as well worth my further research and consideration time now.
But it’s not the only company in my gaze. Another on my watchlist is Smiths News (LSE:SNWS). With the share price in the arena of 63p, the newspapers and magazines wholesaler looks cheap against valuation indicators. For example, the dividend yield’s above 8%.
However, the industry’s been in decline and this is no fast-growth proposition. So there are risks.
Nevertheless, November’s full-year report featured modest results ahead of market expectations. Chief executive Jonathon Bunting described the firm’s news and magazine business as “resilient”. On top of that, cost efficiency initiatives have been paying off.
Bunting thinks Smiths News is well placed to deliver a resilient performance over the medium term. So I think the company deserves its place on my watchlist and is due sharp focus and consideration right now.
