Should I buy UK shares during this stock market recovery?


Image source: Getty Images

Can we see the beginning of a new stock market recovery?

Stocks and My Stocks The ISA has taken a hit over the past few years. It slumped in 2022 when Covid-19 exploded across the globe and British stocks fell in value. And in 2022, a mix of soaring inflation and rising interest rates hit it again.

So you can imagine my excitement at seeing my stock portfolio soar in value recently. UK stock prices rose again and FTSE 100for example, just closed at its highest level since early June.

But could the recent stock market rebound continue? And now is a good time to buy shares?

What happened?

There is little doubt that the positive flow of trade updates — and particularly from the US — has helped lift the stock market

Who likes Microsoft, Apple, Tesla, Amazonand eBay has all the forecast beating statements published over the past month. In England, meanwhile, Lloyds, Unileverand Reckitt was among a number of FTSE 100 companies releasing updates that were better than the market expected.

These names are important because they are used to measure the health of the economy. Of course, the numbers look backwards. But they can suggest that the impact of rising inflation and rising interest rates is not as bad as feared.

Young brown woman is happy with what she sees on her screen
Image source: Getty Images

Buy at dips

There is also evidence that strong dip buying has helped boost the stock market recently.

A well-known investment metaphor is, “high tide lifts all boats” The same can be said when the tide is down, in other words, when the financial markets are down. During times of panic, even the most solid stocks tend to be sold with more vulnerable companies.

This provides an opportunity for eagle-eyed investors to bite and take the bid. This is the strategy that helped legendary investor Warren Buffett make billions. And the search to find oversold companies has intensified as the broader risk appetite has improved.

So whatnext?

It is quite difficult to predict short-term stock price movements at the best of times. The task is even more difficult today given the blow to investor confidence throughout 2022.

Clearly, there are several factors at play that could send the stock market even lower. This includes:

  • Prolonged high inflation and tougher-than-expected rate hikes
  • Oil price jumps as supply worries worsen
  • New spike in Covid-19 cases
  • New trade war as US-China relations deteriorate

What do I have to do?

I myself have continued to buy UK stocks throughout 2022. And I plan to continue to add to my Stock and Stock ISAs regardless of whether the stock market recovery continues or not.

This is because I am buying stocks to hold for the long term, say a decade or more. Over a long period of time, short-term market volatility tends to have very little impact on its eventual return. As they say, the cream finally rises to the top. And I’m sure that the stock I bought in 2022 will provide great returns in the years to come.

In fact, if the stock market recovery doesn’t go well and stock prices fall again, I’ll be looking to buy more bargains.