There’s an old stock market saying that goes: “Nobody rings a bell at the top or the bottom of a market“. That hasn’t stopped vast numbers of investors trying to get the timing right over the years, mind. And right now, I’m seeing a lot of people trying to predict the next stock market recovery.
It doesn’t help that there’s no real definition of a recovery. I mean, how big a rise do we need, and over how long, before we know we have one? Is it plus 20%, the opposite of the usual bear market definition?
I’m not going to try to guess when the next UK stock market recovery will kick in. Instead, I’m going to check for any signs that suggest it might have already started.
FTSE 100 progress
The first thing I’m looking at is the FTSE 100. Over the past 12 months, it’s actually gained a few percent. And it’s remained pretty resilient so far in 2022.
That’s a year in which, over in the US, the S&P 500 and the NASDAQ have both dropped into bear market territory. That is, both fell more than 20% from recent high points.
In fact, over the past two years, the Footsie is up around 14% without any serious dips. It could be argued that the UK stock market recovery started back in 2020 as we emerged from the worst of the pandemic crisis. And it’s still going.
Indicator sectors?
What about looking at sectors that have suffered the worst and are likely to keep falling during any possible recession? The two I’m thinking of are the financial and construction sectors.
As an example, if we look at Lloyds Banking Group, there’s no sign of its 2022 share price fall ending yet. The price had been picking up last year, but falls in 2022 have resulted in a 12-month decline of 10%.
Over at Taylor Wimpey, we’re looking at a one-year slide of almost 30%. And that is showing no sign of halting yet. Could these two sectors be useful indicators of a coming stock market recovery? I think they might.
But you know what? I reckon none of this matters. I don’t care if the stock market is rising or falling. Or whether we’re in a bear market, a recovery, or whatever.
What stock market?
I think the best way to look at it is to ignore the concept of a stock market altogether, and instead just think about individual stocks. Whether Lloyds, Taylor Wimpey, or any other stock is a buy or a sell is not in any way determined by the direction of any overall market.
Right now, I think both of these have been depressed too far and are undervalued. But then, I think that about a lot of FTSE 100 stocks.
And while I’m still buying shares, and hope to be doing so for a good few years yet, I don’t really want a recovery. All I want is cheap shares with good dividends, so I can lock in some top long-term income.
So, a stock market recovery? No thanks.