Investing in the UK stock market in 2024 has been extremely rewarding so far. After years of stagnation due to rising inflation, it seems to be regaining momentum. And since then, FTSE 100 It’s up nearly 11% since mid-January, and if you include dividends, that number jumps to 13%.
That’s almost double the rate that the UK’s leading stock index typically achieves in a year – and it’s the rise investors have been patiently waiting for. But what’s driving this incredible rise, and is this surge just the tip of the iceberg? Let’s take a closer look.
Benefit from the fix
A stock market correction is a sustained decline in prices over a period of months or even years. We have all had to endure this recently, and needless to say, it is never a pleasant experience. However, while the short term may be very bleak, these events create fantastic wealth-building opportunities.
Indeed, falling share prices have created incredible bargains for some blue-chip companies, as my Foolish colleagues have been pointing out for the past 18 months. For those careful with their investment choices, the benefits are finally starting to materialise, with the UK’s main share price indexes trading near all-time highs.
What’s behind this double-digit increase?
While many UK company share prices are moving in the right direction, the FTSE 100 continues to be driven by a small number of companies. Remember, this is a market capitalization weighted index. That means: AstraZeneca (LSE:AZN), shell, HSBC Assets heldand Unilever It has a huge impact on overall performance.
After all, all four of these companies have made a comeback, up 11.4%, 7.8%, 8.9%, and 11.2%, respectively, since the beginning of the year. While some of this growth is undoubtedly due to prior mispricing, investors should take the time to investigate what other factors may be at work. Why? Because there may be even bigger opportunities to be found.
Take AstraZeneca, for example. Its share price rise this year has been driven primarily by the phenomenal success of its cancer drugs. Revenues from the division rose an astounding 26% to more than $5bn (£3.9bn). As a result, management has beaten analyst targets and forecasts, and is likely to continue that momentum going forward. After all, other medicines in the company’s portfolio have also exceeded expectations. In particular, Farsiga (a diabetes and heart failure drug) generated revenue of around $1.9bn (£1.5bn) in just three months.
These impressive results have led management to set out plans to increase the group’s total revenue to $80bn (£62.7bn) by 2030. This is almost double the amount achieved in 2023, suggesting that AstraZeneca’s growth opportunities are only just beginning.
Balancing opportunities and risks
If AstraZeneca can hit its 2030 target, this year’s rally could continue. And because major stock market corrections are so rare, it could be a decade or more before we see another such opportunity. Remember, the last bull market lasted almost 15 years.
But a lot has to go right for AstraZeneca to hit its upcoming milestones. The company has vast financial and intellectual resources. But new drug development remains notoriously difficult. And failure of a new blockbuster drug in late-stage clinical trials could send stock prices tumbling.
Therefore, no matter how attractive the growth opportunities may be, investors should remain disciplined and aim to keep their portfolios diversified.
The article The 2024 Stock Market Rally: Last Chance for a Once-in-a-Decade Bargain? appeared first on The Motley Fool UK.
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HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Zaven Boyajian has no position in any of the stocks mentioned here. The Motley Fool UK recommends AstraZeneca Plc, HSBC Holdings Plc and Unilever Plc. Views expressed on companies mentioned in this article are those of the author and therefore may differ from any official recommendations we may make in subscription services such as Share Advisor, Hidden Winners or Pro. At The Motley Fool we believe considering diverse insights makes us better investors.
Motley Fool UK 2024
