Like most people, I’ve been getting more concerned about the UK economy in recent months. Red flags, including the level of inflation, rising interest rates, and more, are all putting pressure on the stock market. For the moment the market is holding up pretty well. Here are several reasons why (despite the gloomy outlook) I don’t think now is the time to sell my FTSE 100 stocks.
Time out of the market
One concern I have is that I’m trying to time the market. In the past, I’ve sold stocks because I thought there was a slump coming. I turned out to be wrong and missed some of the upside from the subsequent rally as I was sitting in cash.
This time might be different, but ultimately, I’m not in a position right now to make that call accurately. The FTSE 100 is up just over 5% over the past year. In the past month, it’s down a modest 0.8%. Even with the gloomy outlook, I don’t see any concrete signs that the market is trending lower. On that basis, I think selling now could again have a high opportunity cost.
Fiscal packages imminent
Last week, the new prime minister announced a cap on energy bills. Support for businesses was also revealed. In coming weeks, I’d expect Chancellor Kwasi Kwarteng to bring out further fiscal spending plans to help support the economy.
Right now, I don’t know whether the energy package will be enough to help support the UK. I also don’t know what new funding will be announced shortly. But I don’t think it’s a smart move for me to sell my stocks now, before I get the full details.
It might be the case that corporates really benefit from the help provided, allowing the market to rally into the year end. Time will tell, and I think it would be a poor choice for me to sell before I see what happens.
Viable alternatives to FTSE 100 stocks
Finally, I still think that stocks have the potential to offer me the best returns when compared to others. Even with higher interest rates, my returns on a Cash ISA would be minimal. What about crypto? The Bitcoin price is down 50% over the past year. Bonds perhaps? The UK 2-year government bond price has fallen by 5% in the past year.
From that perspective, I think now would be a bad time to sell as there aren’t any asset classes that are massively outperforming.
Clearly, this is just my own opinion. History might not treat me kindly if we do see a crash come in coming months. I think the main risk to my view revolves around tensions with Russia. If we see things escalate, then this could definitely cause a stock market wobble. Yet until that becomes apparent, I’m sticking to my core view and my FTSE 100 stocks.