The market commentators always seem to get it right. Look at the number of people who stepped forward after predicting the financial crisis of 2007–08. Although, I suppose someone is bound to call it when the same thing is said each year.
Take 2017, for instance. A quick Google search for ‘recession 2017’ predicts doom and gloom throughout the year. Reading the headlines would’ve been enough for some nervous investors to stuff their mattresses full with cash. In one piece, a 60% chance of a global recession within 18 months was predicted.
Counter that with a search for ‘FTSE 100 performance 2017’. The first headline, from The Guardian, is the news that the FTSE 100 closed the year at a record high, gaining 7.6% throughout the year. Those investors who moved away from stocks at the beginning of 2017 must have been kicking themselves.
What do the pundits say about the likelihood of a recession next year?
Spooky
It’s much the same as the headlines in 2017: doom and gloom, with a scant sprinkle of optimism.
Trying to guess is rather fruitless. A recession is almost impossible to predict. Sure, there are geopolitical and economic tensions. The US-China trade war and Brexit are often cited in company reports as dampening profitability. Although, at any moment these hurdles could be overcome, possibly causing a surge on share prices.
The election in the UK could cause some uncertainty in the market over the next month, and perhaps even longer. Then again, it could provide the certainty that business and investors crave. No one knows for certain what will happen next year.
One thing I know is that there aren’t many buying opportunities for undervalued stocks in today’s market. Contained in my black book is a list of companies that I will buy when the price is right. I wouldn’t be surprised if some shares receive a correction at some point, as some investors move away from shares, trying to find bigger gains elsewhere.
So, with market commentators predicting a recession, why am I not nervous, and even considering buying shares if and when the market drops?
Frightening
I’m investing for the long term. I don’t know what will happen next year or even next month, but I know what has happened over the previous 30 years. The FTSE 100 index over that period shows that shares have increased by 312%. Of course, past results may not be replicated in the future.
And why would I buy if the market drops? I aim to purchase shares in solid businesses at a good price. If the market effectively offers these at a discount, I’ll buy them. Like you waiting to buy that new sofa in the New Years sale, I’ll be waiting to get the best deal.