Will UK Stock Market Continue to Be a Bull? How Investors Can Make the Most of It?
While the UK stock market is in its 10th year of bull market, it is worth finding how likely it is that it will continue to be the same. Put another way, the question here is whether the burgeoning bull will continue or it will diminish soon. Before we address this question, let’s see what actually a ‘bull market’ is.
According to Investopedia, a ‘bull market’ is the state of a financial market of a group of securities in which prices are rising or are anticipated to rise. Although the term is generally used vis-à-vis securities, it can be referred to anything tradable, including currencies, commodities, real estate and bonds. It is often characterised by investor confidence, optimism, and expectations that excellent investment outcomes would persist into the future – for months or even years.
In general, a bull market occurs when stock prices increase by 20%, often after or before a decline of 20% percent. It happens when the economy is getting stronger and the related conditions are favourable too.
How Long Will It Last?
In the developed world, the U.S. is the chief driver behind bull and bear markets. Twenty nine bull markets have been recognised so far since 1929. By and large, there is no specific duration or return for a bull market, but it is safe to say that the present one is ‘ageing.’ However, it would also be unfair to comment that it won’t continue to sustain or pick up in the coming months.
Incidentally, different investors have different opinions on whether the current situation depicts the state of optimism, thrill, excitement or euphoria.
What to Expect in a Bull Market
During the ‘bull market’ phase, investors expect returns as per the set benchmark, but a few aim to exceed it to generate extra returns. By having a total return tracker on the FTSE100 that invests dividends again, it is sensible to have anticipated returns of over 200% since March 2009.
In case you have been investing since then, but have returns that don’t match with this, then it’s time to question yourself. While fund managers work as per varying benchmarks, it’s suggested to check what exactly the benchmark is, particularly if your manager is continually underperforming. This is important to find if your investments need to be shifted elsewhere before it’s too late.
How Your Investments Measure Up
In general, when client portfolios are assessed, several stocks are viewed as ‘fair dividend payers’ or ‘safe’. However, any investment should ideally be judged on the basis of how effective it is in generating you returns.
It would be unfair to claim certain stocks bad as every stock should be assessed on their current performance. Therefore, you should keep a regular watch on your investments so that you don’t left behind.
To be true, there is no sure-shot key to investing in the stock market, but with the right approach and by debunking several misconceptions, it is quite possible to enable any portfolio perform better. Here are a few to be considered.
- Target High-Performing Stocks: A stock, whose price ranged from 200p to 400p per share over the past three years and that is presently trading at approximately 260p, may appear to be cheap and of great value. But, is this always the case? Well, not every time! Investing in stocks that are close to or at annual lows are likely to add risk to your portfolio, instead of reducing it.
It is suggested to follow the “buy high, sell higher” approach during your next purchase as this will help you stabilise the risk of it breaking the upward trend. A stock, trading near its highs is working in the direction of fund manager money and not opposite it. Institutional money is a major driving force in stock, hence aligning your investments with the ones, who manage extremely large amounts of money is a wise decision.
- Time Your Entries Well: Another common myth is that defensive type stocks don’t move or they have low volatility levels. But, you should always assess such stocks too on the basis of the returns they generate. Investors should never be hesitant about trading these stocks. Holding them and expecting the price to improve is not at all a great investment practice. Using historical price metrics, you can phenomenally better the timing of stock purchases with the aim to optimise possible gains.
Key Points to Remember for Investors
As of now, it can largely be considered that the health of the “bull market” is just great, but the possibility of an abrupt change can’t be ruled out. Therefore, to make the most of this time, it is good to ensure that your investments are performing to their fullest potential.
- Give Your Portfolio the Due Attention: This doesn’t mean that you need to monitor your investments daily, but a quarterly or monthly review can certainly help you realise better returns.
- Align your portfolios with Upward Trends: Stocks with long-term upward trends attract large investments since fund managers are determined to get returns over and above the benchmark assigned to them. Targeting high-performing stocks is perhaps the easiest way to make sure that they fulfil their objectives.
- Don’t Let Underperformers Affect You: In the bull phase, it makes sense to expect from companies to increase their value over time. So, keep track of the benchmark. If your stock is persistently underperforming, find if you need to look for other options as there are a bevy of stocks that are surpassing their benchmarks. Always question anything that fails to pull off as expected.
- Time Your Exits and Entries: Markets have the tendency to move in troughs and peaks. Stocks with long-term upward trends don’t mean that you won’t observe the phases, during which share will ‘consolidate’ or ‘correct’. Monitor the charts or consult with a professional, who can help you with market movements.
This blog post is written by Daniel Pellard , Director at Clear Capital Markets, Senior finance professional with 10+ years experience in a front office environment.
Chartered MCSI, FCA CF30 Registered, Fully RDR Compliant (Valid SPS)
Areas of expertise:
wealth management, portfolio management, HNW private and professional client relationship management, long/short and hedging strategies, risk management, equities, cfds, options, private equity.