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Date : December 6, 2022
Focused investor 2

I’d rather buy UK shares before the stock market rally than afterwards

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UK shares have been climbing over the last few days and suddenly I’m receiving emails from investment analysts claiming the next stock market rally is upon us. They might even be right. They might just as easily be wrong.

I’ve seen thousands of stock market outlook predictions in my time. And while I find them fun to read, I don’t take them seriously. Nobody can predict market movements with any accuracy. There are just too many variables involved.

Typically, each prediction is based on only a handful of topical issues, while overlooking a whole host of others.

I’m buying UK shares whatever analysts say

Right now, analysts seem to be basing their prediction on three insights. First, interest rates may not rise quite as high as markets anticipated. Second, energy prices could fall sooner than anticipated, as European storage facilities fill up ahead of winter. The third insight is that China is about to ease its Covid lockdowns, which should get its economy motoring again.

Yet these are all hazardous predictions. One hawkish word from the Fed would destroy the first. A cold snap would wreak havoc with the second. The third has already been undermined, as China brings back mass testing and lockdowns following a Covid outbreak in Guangzhou.

Plus they are only three things, while there are an incalculable number of political and economic developments that could make or mar investor sentiment in a moment. Anybody who says the stock market is about to rally is guessing. As is anybody who is calling the next stock market crash. Personally, I avoid doing either. 

What I do is quite simple, and doesn’t require a crystal ball. I buy UK shares whenever I have a bit of cash to spare, then hold them for the long term. I prefer to buy shares after the stock market has fallen, because they will be cheaper as a result. A stock market dip is much easier to spot after it has happened than beforehand.

The stock market rally isn’t mine to see

History shows me that in the longer run, stock prices always recover from a crash. Markets recovered from two world wars, the 1970s energy crisis and inflation shock, Black Monday 1987, the dot.com crash of 2001, the Global Financial Crisis of 2007/8, and the Covid pandemic.

If they can survive all of these, I am sure they can recover from all the problems 2022 is throwing their way. The market will rally at some point, I just don’t know when. So I stick to my plan and buy UK shares when I can afford it. So far, it’s been a reasonably successful strategy.

When the stock market rally does come, then all the shares I am buying today will hopefully rally too, and I will be better off. That’ll be a happy day, I’ve just no idea when it will be.

I’m in no rush. The longer it takes for the stock market to rally, the more time I have to pick up my favourite UK shares at today’s low prices.

The post I’d rather buy UK shares before the stock market rally than afterwards appeared first on The Motley Fool UK.

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Harvey Jones doesn’t hold any of the shares mentioned in this article. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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