2023 has been a volatile period for the performance of UK shares. But I’m optimistic that 2024 will have better things in store. It may just be wishful thinking on my part, but let’s explore what could happen in the next 12 months.
A market rally?
Two things could dictate market performance next year and they’re similar to this year. Guessed it yet? Yes, inflation and interest rates.
The former seems to be falling towards the government’s target level of 2%, which is good news. For October the UK inflation rate came in at 4.6%. That’s considerably lower than the 11.1% peak of a year earlier.
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On the back of that, analysts are now predicting we’ve reached the peak of interest rate hikes. Should they begin to fall, which many forecast for late 2024, this could see the market rally.
There are also the wars in Ukraine and the Middle East to consider. Both tragic conflicts have had adverse effects on the market. I’m hoping for peaceful solutions to be found, which would also prop up investor sentiment.
The FTSE 100 topped 8,000 earlier this year and positive developments could send it there (and beyond) again in 2024.
This is all hypothetical, and as great as it would be if I had a crystal ball to predict the future, I don’t.
That said, I’m not too worried. I’m a Fool, so while (of course) I’ll be watching market movements closely, every action I take has the long term factored into it.
What I’m doing
With that in mind, I have my eye on two stocks I think could be long-term winners.
Barclays (LSE: BARC) is one of them. Down over 10% in the last 12 months, I think now could be a smart time to snap up some shares.
It looks incredibly cheap, trading on just four times earnings. Its price-to-book ratio is also just 0.3.
On top of that, it provides a dividend yield of 5.5%. This will help me boost my passive income. It’s worth noting here that dividends are never guaranteed. But covered five times by earnings, I’m confident of the bank paying out.
It has benefitted from higher interest rates. But it Barclays recently downgraded its prediction for its net interest margin (to come in slightly lower than its previous prediction of 3.15%), so the boost from higher rates may have run its course. Regardless, at its low valuation, I’m considering buying shares.
I’m also eyeing Unilever (LSE: ULVR). Its share price has dropped over 8% in the last 12 months.
It trades on 13 times earnings, which I think is reasonable. On top of that, it yields 4%.
It’s been a volatile year for the business. But I like the defensive nature of the stock. For 2023, management is targeting sales growth of 3%-5%.
It’s battled with inflation lately. While the business has increased prices to protect its margins, sales volumes have dipped. I’d imagine inflation would remain an issue. Customers may decide to switch to cheaper alternatives.
Regardless, Unilever is looking to invest in existing brands instead of acquiring new ones to boost growth. That’s a move I like. As such, I’m also tempted to purchase some shares.
Whatever 2024 has in store, I won’t stop buying shares I think are long-term winners.
