Last week, as Russia went to war with Ukraine, the FTSE 100 index took quite the wobble. Uncertainty can be terrifying as an investor in the stock markets, as the value of our savings plunges at such times. It might sound contrarian, but I think this is actually a great time to invest at least £10,000 in my portfolio for a decade. Here is why.
FTSE 100 is resilient
First, consider stock market resilience. While it is true that the FTSE 100 index dipped last Thursday, it has bounced back fast. At its last close, it was just short of 7,500. And even though it is trading below these levels on this Monday afternoon, it is still possible that it could end today’s session with gains. In fact, even if greater uncertainty were to arise because of the current geopolitical situation, I am fairly confident that the markets could still recover in time.
As proof of that, we need to look no further than two years ago when the pandemic started. The FTSE 100 index took quite the plunge in March 2020. But almost two years later, it has fully recovered from it. And in hindsight the past two years look like they presented investors with golden investment opportunities.
Buying at a discount
And that brings me to my next point. While a number of stocks have already recovered from last week’s plunge, investors do appear a bit diffident about some. From what I can tell, some cyclical stocks appear to be particularly impacted. Cyclicals are those stocks whose fortunes are tied with the economy. While the economy looks good for now, the war could impact it in one crucial way. That is through inflation. Oil prices are rising and gas prices are expected to rise too, considering that Russia has appreciable gas reserves. This is likely to feed into overall consumer prices, which are already high. This in turn will impact companies’ financials.
However, this becomes an unmanageable situation only if the war continues for a long time and no alternatives can be found. It is too soon to say if that will happen. And going by the global history of surviving all kinds of challenges, I think that it is more likely to be resolved than not. So it is a good time for me to focus on buying stocks that are trading at a discount right now.
What I’d do now
One example from my own portfolio is the FTSE 100 stock Lloyds Bank, whose share price has fallen to sub-50p levels once more. It has not exactly proven itself to be a fantastic growth stock to hold even before the pandemic, but now I think it is quite low-priced even by its own past standards. I reckon that if I could load up on it and other cyclicals now, they would reap me significant gains over the next decade. And that is what I’d do now.