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Surely UK stocks can't struggle in 2024 in the same way they did in 2023, right? I am optimistic and foresee a better market outlook.
Let's take a look at some scenarios that could spark a market rally, as well as some stocks I'm considering buying when I can.
Macroeconomic and geopolitical changes
It seems as if last year's disastrous government mini-budget accelerated the macroeconomic turmoil we have recently found ourselves in. Inflation has skyrocketed and interest rates have also been rising steadily. The byproducts of these problems are a cost of living crisis, higher energy and food prices, as well as an uncertain housing market.
Inflation appears to be heading towards the government's target level of 2%. This has led analysts to predict that we could be at the end of the several consecutive interest rate hikes we have suffered recently. If this were to happen, the economy would be in a much better position and could drive markets higher. The housing market could begin to regain positive momentum and inflation in food and potentially energy prices could lift us out of the current cost of living malaise.
The tragic events in Ukraine, as well as the more recent conflict in the Middle East, have also wreaked havoc. For example, Russia is one of the largest producers and exporters of fossil fuels. After invading Ukraine, sanctions from other countries that did not want to deal with the superpower sent fuel costs skyrocketing. Like most people, I hope for peaceful solutions in Europe, as well as keeping my fingers crossed for a ceasefire and a longer-term solution in the Middle East. Positive developments could also help global markets and overall investor sentiment.
Cheap stocks Available Now
Vodafone It has recently undergone a transformation to optimize operations and is focusing on avenues for growth. This is an area that excites me. It is looking to gain ground in the burgeoning African market, where telecommunications adoption is increasing rapidly. A price-earnings ratio of two makes the stock look very cheap to me. One risk I will watch is its debt load. This could hinder the rise of its shares and its profitability.
Aviva In my opinion, the stock looks seriously underrated and undervalued. Additionally, it would be an excellent stock to increase my passive income with a 7.5% dividend yield. Although dividends are never guaranteed, Aviva's appear to be well covered by profits. Additionally, the stock looks cheap with a price-to-book ratio of just over one. This is low compared to its peers in its market. Any continued macroeconomic issues could cause demand for Aviva's non-core insurance products to decline. This could impact performance and payments.
National Network It is possibly the most defensive stock on the FTSE index, in my opinion. It owns and operates the electricity and gas transmission system in the United Kingdom. Everyone needs energy, and without competitors, this monopoly should allow it to maintain stable performance. In my opinion, the AP/E ratio of five and a dividend yield of 5.5% make the stock an attractive option right now. Stricter regulation by the government could curb any passive income, while maintaining such a vital and extensive infrastructure network could also prove costly.
