If I were to start my stock market investing journey today, I think now would be a great time for me to start buying FTSE 100 stocks. There is no denying that there are risks on the horizon, even increasing risks. But it is also true that the opportunities are huge. And they are even growing in some sectors.
FTSE 100 index is robust
First consider the performance of the FTSE 100 index so far in 2022. The index is up by only around 1% in January, but the overall number hides an important development. The index finally touched 7,500 this month, and even closed above that level for more than one session. At one time it even reached 7,600+ levels. I think this could bode very well for the future as well.
Growth opportunities in the UK
Component companies of the index have been reporting good updates, and the prospects for the UK economy look good too, which also bodes well. The International Monetary Fund just updated its growth forecasts for 2022, which put the UK’s growth among the highest across Europe’s developed economies. In a recent survey, the investment bank Goldman Sachs also found that its clients expect European stock markets’ growth to outstrip that of the US. So clearly the winds are blowing in favour of our economy.
Also, the latest numbers from the UK look robust. The UK economy is finally back to its pre-pandemic levels. It might have taken a while, but clearly it is on the right path. And this, in particular, could be a big positive for UK market-centred stocks. Many of these can be found in the FTSE 250 index, while the FTSE 100 index has a far more globalised variety of stocks. Even then, I can find UK specific stocks like Lloyds Bank and Natwest, that could really gain from the ongoing recovery.
Dividend yields to strengthen
And banking is just one sector where the growth opportunity just got bigger. The others include oil stocks, green energy related ones, and even the still beaten-down recovery stocks in industries like travel and tourism. Because their growth now holds promise, I reckon that they could increase their dividends as well. I am particularly hopeful for oil stocks, which could see quite the windfall as oil prices keep rising. According to AJ Bell research, the dividend yield for the FTSE 100 as a whole is expected to be 4.1% in 2022, up from 3.4% right now. And stocks like Royal Dutch Shell and BP are indeed expected to grow their dividends, even while last year’s dividend stars like the industrial metal miners are expected to reduce theirs.
The inflation worry
Both dividends and growth could however be hurt if inflation continues to rise. The UK has seen two months of 5%+ annual inflation, and as per forecasts, it could stay elevated in the near future as well. Many FTSE 100 companies have flagged it as a risk in their updates. I am watching out for this aspect when buying stocks now. But all things considered, I reckon that this is a really good time for me to invest £10,000 in the stock markets.
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Manika Premsingh owns BP and Royal Dutch Shell B. 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.
