While interest rate rises are forecast over the coming years, the speed at which they increase is expected to be rather pedestrian. As such, savers may experience negative real-terms returns from having Cash ISAs.
This could make the prospects for the FTSE 100 even more appealing. The index also appears to offer good value for money at the present time, with a number of large-cap stocks having growth potential and attractive valuations.
Therefore, now could be the right time to focus on these two FTSE 100 stocks. They may have experienced a turbulent summer in terms of their capital returns, but in the long run, their risk/reward ratios appear to be enticing.
The latest results from RBS (LSE: RBS) showed that economic uncertainty is weighing on its financial performance. It is, therefore, unlikely to meet its cost:income ratio and return on tangible equity targets for 2020.
While disappointing, the bank is expected to deliver on its targets over the medium term, with its recent interim results highlighting the cost savings that are currently being delivered. And, while the cost of PPI claims could prove to be higher in the short run than previously expected due to a surge in claims as the August 2019 deadline approached, the long-term prospects for the bank could be more positive than its valuation suggests.
In fact, RBS currently trades on a price-to-earnings (P/E) ratio of just 7.5. Alongside a forward dividend yield of 6% that includes special dividends, its income and capital return potential over the long run could be relatively high.
Certainly, continued economic uncertainty may weigh on its financial performance in the near term. But, with the UK economy forecast to grow by 1.4% in the current year and 1.3% next year, the bank’s financial prospects may be more encouraging than its share price suggests.
Having fallen by around 7% in the last three months, online property listings business Rightmove (LSE: RMV) could experience a period of uncertainty. Although house price growth does not directly impact on its financial performance, a slowdown in the property market could cause investor sentiment to decline to some degree over the coming months.
This, though, could present a buying opportunity for long-term investors. Rightmove has a dominant position in what remains a lucrative market that is expected to become increasingly popular as digital channels gradually become a more dominant part of the wider estate agency industry.
Since the stock is forecast to post a 13% rise in its bottom line in the current year, its outlook is relatively positive. It has recorded double-digit earnings growth in every one of the last five years, which suggests it has a solid strategy and a degree of consistency in what is an uncertain wider housing industry. As such, now could be the right time to buy it following its recent share price pullback.
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Peter Stephens owns shares of Royal Bank of Scotland Group. The Motley Fool UK has recommended Rightmove. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019