The latest leg of the stock market rally has driven the FTSE 100 above 6,500 and some investors will be wondering whether they have missed the chance to buy cheap UK shares. Given that the index fell below 5,000 in March, that was clearly a better buying opportunity than today. But I’m not worrying about that. This is still a great time to invest.
I think there is a good chance the stock market could enjoy another big rally next year, and I want to be there when it does. That’s why I’m sizing up potential FTSE 100 targets today.
Investing is not a one-shot business. If you start early, you could be doing it for 30 or 40 years, and possibly longer. You will never buy at the exact bottom of the market, so forget where the FTSE 100 stood six months ago. That moment has passed. I think this stock market rally has much further to run.
I’d buy FTSE 100 shares today
Most people agree that 2021 has been a dismal year for the stock market. In the short run, that is true. Despite the rally, the FTSE 100 is still around 1,000 points lower than at the start of the year. On the other hand, the crash has give long-term investors a great chance to snap up shares at greatly reduced prices. I invest a regular monthly sum and my spring and summer contributions are already worth a good deal more.
Brave and forward-thinking investors who took advantage of the crash in March could be sitting on a 30% gain. That is why we at The Motley Fool urge investors to buy shares when markets crash. History shows they rarely stay down for long, and the early stages of a stock market rally are often the most lucrative.
I’m gearing up for the next stock market rally
The new Covid-19 vaccines are game-changers. Let’s assume for a moment that the government somehow avoids botching the rollout programme. If it does, the country could explode out of the blocks next year.
I don’t want to underplay the social and economic damage, and the trauma facing those approaching Christmas in fear of their jobs. The 2020 recession is the fastest and deepest in 300 years, and millions have been hit hard. Yet this is different to the financial crisis. The recession was artificial, mandated by the government lockdown. If the vaccine does set us free, stock markets could rally at speed.
People will hit the pubs, gorge themselves at restaurants and besiege airports. They will do everything they can to get their old lives back, because they are tired of being stuck at home. If I am right, the economy will spring back to life, and shares like the two I wrote about this week will lead the charge. The recent stock market rally may only be the beginning, especially if Brexit clouds lift.
There is talk of the ‘roaring 20s’. Much of this may be overdone, but buying UK shares today will surely have paid off by 2030. That’s why I am going shopping today.