The UK stock market is doing well at the moment. FTSE 100 and FTSE 250 They are on the rise. The former has already seen double-digit gains, including dividends, and the latter is following suit.
But as always, perpetually bearish investors have come out of the woods with sensational, fear-inducing headlines predicting an imminent crash.
Among them is British investor Jeremy Grantham. His words carry a lot of weight, and it’s not hard to see why. He runs funds with over £21 billion in assets, and has made a 227% return over the past decade. That’s a pretty impressive track record, but is he right that the end is near?
Let’s look at the numbers.
UK GDP matters
Although the UK stock market is on the rise, the economy remains sluggish. The UK fell into recession at the end of 2023. GDP growth recovered in the first quarter of 2024, but total growth was a staggering 0.2%.
Slow growth has been a challenge for the UK economy for over a decade. It’s a complex story with multiple contributing factors, but most economists agree it’s due to a lack of innovation.
For developed countries, technology plays a key role in achieving sustainable growth. FTSE 350 Realize the number of tech stocks London Stock Exchange Compared to exchanges like those in the US, they have serious flaws Nasdaq.
Another recent issue is the rising cost of capital. Rising interest rates have been a blow to many mortgage holders. But this pressure seems to be being felt by UK businesses as well. 2023 saw the highest number of insolvencies in the last 30 years, and so far 2024 looks set to continue that trend.
Employees who lose their jobs also lose disposable income, which reduces consumer spending and makes it harder for other businesses to grow and pay their bills. If this cycle reaches a tipping point, it could set off a wealth-destroying spiral that could lead to the catastrophe that investors like Grantham predict.
Take a step back
These predictions may be unsettling, but take them with a pinch of salt: Like many perennial bear investors, Grantham has been predicting market crashes for more than a decade, meaning those who have avoided investing have missed out on the longest bull market in history.
The rise in insolvencies is worrying, but with inflation currently at 2.3%, the Bank of England’s tightening monetary policy may soon be coming to an end, which is great news for companies with leveraged balance sheets. Warehouse REITs (LSE:WHR).
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Urban warehouse operators have already been forced to sell some stores to get debt under control, with knock-on effects on their net rental income. But it also allows them to continue paying dividends to shareholders despite tough conditions. A cut in interest rates later this year could put an end to those headwinds.
Warehouse REITs aren’t alone in this situation, but barring a sudden resurgence in inflation, 2024 could be a great year for long-term investors even after the solid gains so far.
The article Will the UK Stock Market Crash in 2024? appeared first on The Motley Fool UK.
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Zaven Boyrazian has invested in Warehouse REIT Plc. Motley Fool UK recommends Warehouse REIT Plc. Views expressed on companies mentioned in this article are those of the author and may differ from official recommendations made by subscription services such as Share Advisor, Hidden Winners or Pro. At Motley Fool we believe considering a diverse range of insights makes us better investors.
Motley Fool UK 2024
