Now might seem like a bad time for UK investors to search for stocks to buy. Speculation of a fresh stock market crash is gathering pace as investor confidence has plunged again.
The FTSE 100 is now down 1% since the start of 2023 following a fresh sell-off, as the chart below shows. Meanwhile, the UK-focused FTSE 250 has lost a whopping 8% of its value in the year to date. Rising fears about interest rates mean investing conditions could get worse before they get better.
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But as an active investor myself I’m not selling up and running for cover. No, I’m actually building a list of top shares I’d like to buy in case financial markets plunge further.
Why are markets sinking?
Chill winds of worry are swirling about high interest rates settling in and there is set to be little respite from the sell-off. Investors have again been reminded by central bank policymakers in the US that the screws may have to be tightened on monetary policy again, and kept there for some time, to stop inflation whipping higher again.
Susannah Streeter, head of money and markets at Hargreaves Lansdown
Bond and stock markets have sold off sharply again as concerns over the global economy have spiked. Oil prices have also collapsed back below $90 per barrel too following the drop in investor confidence.
More strong jobs figures from the US have reignited concerns that inflation may not fall as quickly as hoped. In this scenario the Federal Reserve may not cut rates as rapidly in 2024 as was being predicted, which would in turn put the cosh on corporate profitability.
Investing like Warren Buffett
Clearly these issues could have a significant impact on investor returns in the short-to-medium term. But they’re not discouraging me from continuing to buy UK shares. This is because I buy stocks based on what profits I can expect to make over the long haul (that is, a decade or longer). And right now there are many great companies trading on ultra-low valuations.
Past performance isn’t always a reliable indicator for the future. But in terms of stock markets, history shows us that company profits have always bounced back following macroeconomic and geopolitical crises, pulling share prices higher again.
At times like these I’m reminded of billionaire investor Warren Buffett‘s wise words to “be fearful when others are greedy, and greedy when others are fearful.” He’s built his fortune by buying quality stocks when they plummet in value and watching them recover when economic conditions improve.
It’s why I’ve bought shares in FTSE 100 companies including Diageo, Ashtead Group, Bunzl and Legal & General in 2023. And it’s why I plan to continue adding to my Stocks and Shares ISA in the months ahead. I hope I could follow Mr Buffett (and the UK’s hundreds of ISA millionaires) and make big long-term returns.
