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Tell a friend: yesterday, the FTSE 100 closed at its highest point in almost 4.5 years!

Abstract 3d arrows with rocket
Image source: Getty Images

This week started strong for UK stocks, with the FTSE 100 seeing its fifth consecutive day of gains in the new year. It ended trading on Monday at 7,724.94 points.

Some would say that’s pretty impressive for the leading index in a country whose chancellor has confirmed is in a recession — one which many commentators say is set to be the deepest on record for many years, potentially ever.

Many believe the markets are in for a huge drop. No-one has a crystal ball, and everyone is entitled to their opinion. But I remain optimistic on the prospects of stock-picking right now.

One reason is because markets are quick to price in bad news. For instance, recall when Liz Truss and Kwasi Kwarteng set out their “bold plan” to cut taxes and grow the economy. Too bold, as it turned out. Warnings from the International Monetary Fund (IMF) pushing the FTSE 100 down to 12-month lows.

We all know what happened next, while the Footsie rebounded sharply in the aftermath as well.

So my personal opinion is that stock markets are already prepared for bad news. Of course, they may dip somewhat if companies consistently and collectively report worse-than-expected news during earnings season.

But the inverse is also true. And among the first few to release their results in the first week of 2023, there were some better-than-hoped-for figures (from the likes of Next). So initial signs are good, I believe.

Be prepared

Additionally, here at The Motley Fool, we are long-term investors. If — and at this stage, I think it’s a big ‘if’ — the FTSE 100 and other UK stock markets do plunge again in 2023, then I’m mentally prepared for that.

Because when buying shares in, and thus owning part of a company, I’m doing so not for any number of months until the end of the year. No, I’m in it for the long haul: three to five years, minimum. But ideally, for decades! I’m happiest when I’m doing very little, and my money is working for me.

And that’s why it’s important to trust in the long-term future of a business when investing in it. It’s vital to understand the sector, and the company’s position within that. For example, whether it’s a market leader or potential disruptor.

We Fools — capital F, of course — understand that, historically, markets go up. Check out charts of the FTSE 100 since inception if you don’t believe me! And we also have faith that knowing a good business inside out can lead to market-beating returns. Regardless of any temporary blips caused by external factors.

So, to sum up, I’m of a mind to take heart from the Footsie’s fresh highs in approaching half a decade, despite current economic conditions. When friends ask me whether it’s a good time to buy shares in quality companies, I respond that, for me, the answer is the same as ever: always!

The post Tell a friend: yesterday, the FTSE 100 closed at its highest point in almost 4.5 years! appeared first on The Motley Fool UK.

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Sam Robson has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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 2023