Although you can never be completely sure which way the market will go, recent sustainable growth is a good indication that now is the ideal time to invest. This might sound like the contradictory advice given the fact that the FTSE 100 has been in decline since the start of September 2015, but analysts believe such a drop actually offers renewed buying opportunities.
Investors that missed the earlier summer sell-off can now capitalise on an attractive entry point to the UK market, which is currently undervalued compared to the US. What’s more, financial firms like IG make it incredibly straightforward to spread bet, trade CFDs or start stockbroking thanks to easy to use platforms and expert insight from industry professionals. It’s never been simpler for investors to take a route into this market.
Current conditions in the UK and US
Despite the fact that the FTSE 100 experienced a strong start to 2015, it suffered a sharp decline in September and hasn’t fully recovered since. The wider FTSE All Share also dropped significantly as a result of volatility across global markets, particularly the Chinese market.
However, it is important to look past this short-term blip and concentrate on prolonged improvements instead. Having studied long-term valuations using the Shiller cyclically adjusted price-to-earnings ratio or ‘CAPE,’ analysts from JPMorgan said that the current stand point below the average level means UK equities still have more room to run.
Furthermore, forecasts for 2015 suggest that UK equity earnings are on the up and its current undervaluation, when compared to the world’s largest developed market in the US, should keep everything in check.
As far as income is concerned, the UK equity market also continues to thrive. In fact, more than 50 companies are offering a dividend of more than three percent, with an average yield of around five per cent. This is significantly more than the average payout from high-income companies in the US, which is currently hovering around four percent.
Market outlook and future predictions
Sustainable market growth has been supported by the UK’s increasingly strong economy, which shows no sign of weakening. Over the past four years, the UK has achieved average annual economic growth of just under two percent, which makes it one of the best performing G7 countries.
On top of that, from January 2015 the UK has witnessed the longest period of sustained real wage growth since the global financial crisis of 2007 while unemployment has also hit a seven-year low. Coupled with strong population growth, which will provide sustainable support to public finances, the future looks good for those wanting to invest.
In a Market Insights note, JPMorgan’s Alex Dryden and David Stubbs said: “Rather than simply investing in the UK via a larger index, we believe the UK equity market is large enough to justify its own allocation in investor portfolios, in ways that can provide more direct exposure to the UK economy.”