Several events over the past couple of weeks have caused some investors to start the year a little more cautiously when it comes to investing. I think that makes sense as there are a few different issues that could cause a stock market crash. Being forewarned is being forearmed. So here I go!

Fiscal stability

Last week, the yield on the 30-year Government bond hit the highest level since 1998. In simple terms, it means that the cost of borrowing for the Government is very high right now. This is a problem, as the Labour Government has pledged to try and balance the books and improve public finances.

However, if borrowing costs keep increasing, spending will rise. In order to balance things, taxes might have to rise or existing spending plans could be cut. This could lower economic growth and cause investors to panic.

Global politics

Next week, Donald Trump will be inaugurated as the new President of the US. He’s already made several bold statements, including talking of taking over Greenland and having additional trade tariffs on China.

In the first few months of power, there’s the potential for news to come out from America that would upset the market. Given that most FTSE 100 companies are global in nature, any such problems could cause a volatile market reaction.

Inflation and interest rates

The final concern that could materialise is if inflation starts to rise again. This would likely be fought by the Bank of England keeping interest rates higher for longer. It’s not impossible to think that we might not have any interest rate cuts for this year, depending on how things go.

This could hurt the stock market, particularly companies that sell directly to the consumer and have debt. For example, British American Tobacco (LSE:BATS). The FTSE 100 giant has seen the share price rise by 23% over the last year.

However, the bulk of business relies on selling to consumers. Even though some will buy vapes and related products in any scenario, there are some who would cut back on their spend if they were concerned about high inflation and the impact of high interest rates on their mortgage or loans.

It’s worth noting that the last annual report showed total debt of £39.16bn. The net debt-to-EBITDA ratio (a measure of how indebted the business is) stands at 2.7x. This is quite high. If any of this debt needs to be refinanced or new borrowing is needed, the higher interest costs could hurt overall profitability.

Of course, the business could deal with this. If it can continue to pivot away from traditional tobacco products to new alternatives, the increased revenue could offset higher interest costs.

There are several factiors that could cause a market crash before the summer. I’ll be keeping an eye to see if anything starts to flash red!

The stock market’s wonderfully diverse, with almost limitless options for a Stocks and Shares ISA. For intrepid investors willing to swing for the fences, here are two high-risk, high-reward ideas to consider.

Gene-editing

First up is biotech firm Crispr Therapeutics (NASDAQ: CRSP) which pioneered the Nobel Prize–winning CRISPR/Cas9 technology to edit genes.

A year ago, it had its first treatment, Casgevy, approved for sickle cell disease and beta-thalassemia, rare blood disorders that are often debilitating for sufferers.

Crispr Therapeutics and its partner Vertex Pharmaceuticals have started to collect cells from 50 patients. These will be edited outside the body and reinfused into the patient with the aim of curing them. The NHS is currently rolling out Casgevy.

Looking ahead, the two companies have identified some 58,000 patients in the US, Europe and the Middle East. At a cost of around $2.2m a patient, the revenue opportunity over the next few years could be in the billions (Crispr will get 40% of sales with the rest going to Vertex).

The firm also has a promising gene-editing candidate for blood cancers in the clinic, as well as a potentially revolutionary treatment for type 1 diabetes that aims to restore insulin production.

Naturally, the biotech’s vulnerable to setbacks in these clinical trials. And given the firm’s lack of revenue, never mind profits, the negative impact on the share price would likely be sizeable.

Nevertheless, the company had $1.9bn in cash toward the end of last year, which is enough to fund its exciting pipeline of treatments.

With the share price down 39% over one year, and the firm sporting a modest $1.5bn enterprise value, I think Crispr Therapeutics stock is worth considering.

Ready for lift-off?

Next up is Archer Aviation (NYSE: ACHR), which is racing to commercialise electric vertical takeoff and landing (eVTOL) aircraft. These take off vertically like helicopters but are near-silent and far greener, making them perfect for congested urban cities (Los Angeles, New York, Tokyo, Abu Dhabi, etc).

Archer intends to launch an Uber-like air taxi service and also sell EV aircraft directly to third-party customers. For example, it recently entered a strategic partnership with Anduril Industries to develop hybrid aircraft for military applications (reconnaissance, for example, given how quiet they are).

Now, the thing here is that the company still hasn’t had its aircraft, called Midnight, fully approved by the Federal Aviation Administration (FAA). It expects to achieve this later in 2025, but there could be regulatory delays (or worse). So this stock’s highly speculative at this stage.

However, there are a few things I like here. First, Archer has nearly completed phase three of the FAA’s four-phase certification process, while making progress through the final stage. And it’s on course to launch a commercial air taxi service in Abu Dhabi later this year.

Next, it has just finished construction of a high-volume, 400,000 sq ft manufacturing facility. With backing from car giant Stellantis, it intends to scale up to 650 aircraft annually by 2030. Archer’s currently well-capitalised and its order book now exceeds $6bn.

Finally, Morgan Stanley estimates the eVTOL market could top $1trn in 15 years! Archer Aviation’s market-cap today is $4.3bn. At $8, I think the stock’s worth considering for adventurous investors.

Despite the FTSE 250 gaining 6% over the past year, some constituents have performed much worse. Burberry Group‘s (LSE:BRBY) a good example, becoming a potential value stock following the move late last summer to fresh decade lows. Yet with a sharp jump today (16 January), it’s certainly back on people’s radar.

Key reason behind the rally

It might surprise some to find out that the business hasn’t released any regulatory news or financial results today. Rather, the spike can largely be attributed to the release of results from Richemont, the luxury holding group which owns a host of brands ranging from Cartier through to Montblanc.

Earnings showed a relatively unexpected 10% jump in sales during the festive shopping season versus the previous year. Analysts had expected growth to be flat during the quarter.

The Americas and Europe helped to drive the strong results. The 7% drop in sales from Asia Pacific wasn’t as bad as expected either.

Richemont stock jumped as much as 18% following the news, with other stocks in the luxury sector gaining too. For Burberry, some of the gains are simply from the follow-on impact of this.

Naturally, some investors might think the results could be a sign that the slowdown in the luxury market is coming to an end. If correct, then Burberry could start to show better financial performance later this year.

Turnaround time

It’s unusual to see such a large move for a stock based on results from another company. Yet for Burberry, it’s been so battered over the past year that it does have a lot of headroom to quickly move higher. The move so far today means that the share price has rallied 58% in just the past three months. Despite this, it’s still down 11% in the last year.

It still has ground to make up from the past couple of years of disappointing share price losses. The turnaround plan via its new CEO Joshua Schulman, detailed back November, has proven to be somewhat of a catalyst for the stock. At that point, a cost-saving plan was introduced with the aim of saving tens of millions of pounds to help the firm.

Should we be in a scenario where the efficiency drive is progressing well, alongside a pick-up in demand for products, then the stock could be set for a strong 2025.

The calendar ahead

A trading update is due out in just over a week’s time. This could be very important in deciding the direction for the coming few months for the share price.

I feel that investors might have seen enough already to decide Whether or not to buy this value stock. Some might still be on the fence. In that case, waiting until the financial update could be a smart move before deciding whether to get involved.

It’s safe to say global markets haven’t had the best start to the year. The S&P 500 slipped 210 points in the weeks following Christmas, reaching a two-month low on 10 January. The FTSE 100, DAX and Nikkei suffered similar dips.

But news of rising US employment rates helped pause the S&P 500’s decline. Then, yesterday (15 January), consumer inflation data revealed a slowdown in price increases. After dashed hopes of interest rate cuts and the threat of trade tariffs, the market needed some good news.

Following the index’s 1.7% jump, the Dow Jones Industrial Average rose 1.6% and the Nasdaq Composite soared 2.3%.

The US Consumer Price Index (CPI) now shows more promise of reaching the Fed’s 2% inflation target for December. The month-on-month slowdown in growth from 0.3% to 0.2% is the first sign of deceleration since July 2024. Odds of an interest rate cut in June are now considered more likely than not.

But don’t get too excited. 

US equity forecasts for 2025 are still underwhelming compared to last year. So what does this all mean for investors?

Choosing the right tech

An overarching theme I’m seeing more frequently is uncertainty regarding the major tech stocks. The so-called Magnificent 7 appear to have fallen out of favour. This may be partly due to Warren Buffet’s Berkshire Hathaway selling two-thirds of its Apple stock.

Some feel the move was a mistake and Apple remains the highest-weighted stock on the Nasdaq 100. But it’s hard to ignore one of the world’s most successful investors. I’m no die-hard fan but I can’t help but wonder: does he know something we don’t?

So to err on the side of caution, I’m steering clear of big tech for now. However, one major US tech stock I hold could buck the trend, and I think investors may want to consider it.

On the sidelines

Axon Enterprise (NASDAQ: AXON) is a US tech company that manufactures safety devices such as TASERs, body-worn cameras, and digital evidence management software.

Its products are used by police and military across the US and have seen a surge in demand recently. Innovative developments like its Draft One AI-enhanced reporting software have helped boost sales.

In its third-quarter results for 2024, it reported earnings of $1.45 per share and revenue of $544.3m, a year-on-year increase of 42% and 32%, respectively.

The rapid growth meant it joined the Nasdaq 100 in December last year, moving to position 73 with a weighting of 0.28%.

Naturally, the soaring price has raised some concerns. With a price-to-earnings (P/E) ratio now well above 100, further price growth seems hard to imagine. A mild correction has already seen the price fall 10% in the past month. If the next earnings report falls below expectations, the price could take a big hit. It also faces the risk of budgetary cuts or regulatory changes.

Still, I think its long-term prospects are strong, driven by its dominance in a niche market. As competing semiconductor stocks try topple each other, Axon may sidestep the action and scoop up the spoils.

Shares in FTSE 100 retailer Marks and Spencer (LSE: MKS) have dropped 15% from their 6 November high of £3.95. This is despite strong recent results, including its Christmas trading statement released on 9 January.

This disparity and its sub-£4 share price makes me think a serious bargain could be had here.

The Christmas update

This wasn’t just any Christmas update, this was Marks and Spencer’s Christmas update for the entire Q3 period up to 28 December.

It saw year-on-year like-for-like (LFL) sales rise 8.9% for its Food operation (to £2.581bn), ahead of analysts’ forecasts of 7.8%. And Clothing, Home & Beauty LFL sales increased 1.9% (to £1.305bn), again ahead of projections (for a 0.7% rise).

LFL sales measure the growth of a retail business from its existing stores and space, excluding the impact of new store openings or closures.

Despite this, the shares fell after the release. I think this was mainly due to the warning from CEO Stuart Machin that the external environment remains challenging.

Marks and Spencer was one of the 79 signatories of the British Retail Consortium’s post-Budget letter to chancellor Rachel Reeves. It warned of problems that may arise from the 1.2% increase in employers’ National Insurance.

It added: “The effect [of significant cost increases] will be to increase inflation, slow pay growth, cause shop closures, and reduce jobs, especially at the entry level”.

These are all key ongoing risks for Marks and Spencer, in my view.

How does the core business look now?

Before the 30 October Budget, the firm had published a series of strong results. For its fiscal year ended 30 March 2024, profit before tax (PBT) and adjusting items soared 58% year on year to £716.4m. Its half-year results issued on 6 November showed a 17.2% jump in PBT and adjusting items year on year — to £407.8m.

These numbers come two years into its ‘Reshape for Growth’ five-year strategy announced at its Capital Markets Day in 2022. This was aimed at refocusing on quality, innovation and value for money.

Even after the October Budget, analysts forecast Marks and Spencer’s earnings will grow 9.3% each year to end-2027.

And it is this that ultimately drives a company’s share price (and dividend) higher.

How undervalued are the shares?

Marks and Spencer currently trades at a price-to-earnings ratio of 13.4 against a competitor average of 27.8. So it is technically very undervalued on this basis.

This also applies to its 2.2 price-to-book ratio compared to a 5.2 average for its peers. And it is also the case with its 0.5 price-to-sales ratio against its competitors’ average of 1.4.

And a discounted cash flow analysis shows the shares are 43% undervalued at their present £3.35 price.

Therefore, the fair value of the stock is £5.88, although market unpredictability may move them lower or higher.

Will I buy the stock?

Aged over 50 now, I focus on shares that generate a yield of 7%+. Marks and Spencer only recently reintroduced a dividend, which is currently less than 1%. So it is not for me at my point in the investment cycle.

However, if I were even 10 years younger I would snap it up, based on its strong earnings growth potential.

FTSE 250 defence firm QinetiQ (LSE: QQ) is down 16% from its 1 August 12-month traded high of £4.90. However, it is still up 25% from its 16 January one-year traded low of £3.29. And it has jumped 65% from its opening price on 24 February 2022 — the day Russia invaded Ukraine.

In my view, the drop since August is unsupported by recent results. I also think it is based on the false assumption that global security will improve in Donald Trump’s second presidency.

Consequently, now looks like a great opportunity to consider the stock for those investors whose portfolio it suits.

A false premise

It is true Trump has said he can end the Russia-Ukraine war in a day. It is also true that Israeli actions against Iran’s proxies have reduced Middle East hostilities.

However, it remains the case that the Russia-Ukraine war continues. And Syria looks to be a likely new focal point for further Middle Eastern conflict, in my view.

Additionally, European NATO members are increasing their defence spending to 2%+ of GDP. The shortfall in meeting this target over the past 30 years is estimated at €1.8trn (£1.5trn).

On 2 December, UK defence minister John Healey said the government will outline its plan to increase defence spending to 2.5% of GDP this spring.

A strong core business

QinetiQ looks to me to be in a great position to benefit from such spending increases. It was formed by the UK’s Ministry of Defence (MoD) when it split its Defence Evaluation and Research Agency. Since then, it has become a world leader in the evaluation, integration and securing of military mission-critical platforms and systems.

Its interim H1 2025 results released on 14 November saw revenue up 7.2% year on year – to £946.8m. Operating profit increased 6.5% to £106.6m, and earnings per share rose 6% to 14.2p. Additionally highly positive for me was net cash flow from operations soaring 83% (to £130.9m) while net debt tumbled 30% (to £190.9m). Orders over the period jumped 8.7% to £1.0348bn.

A risk here is that planned defence spending increases are reduced for some reason. That said, analysts forecast that QinetiQ’s earnings will increase 15.19% every year to end-2027. And it is this growth that ultimately powers a company’s share price (and dividend) higher.

How undervalued is the stock?

The firm trades at a price-to-earnings ratio of just 16.3 against an average 28.2 for its competitor group. So it looks very cheap on this basis.

The same is true on the price-to-book ratio, on which it trades at only 2.4 compared to a peer average of 3.1. And it also applies to the price-to-sales ratio, with QinetiQ at 1.1 against a 1.7 average for its competitors.

To ascertain what all this means in share price terms I ran a discounted cash flow analysis. Using other analysts’ figures and my own, this shows the stock is 49% undervalued at its present £4.10 price.

Therefore, its fair value is technically £8.04, although market vagaries might move it lower or higher than that.

Will I buy the stock?

I already own a defence stock (BAE Systems), so having another would unbalance my portfolio.

If I did not have it, I would see QinetiQ as a terrific buy at the current level and would purchase it soon.

2024 proved challenging for many UK stocks with some plunging more than 20%. These three FTSE 100 blue-chips were among them. Can they use this as a springboard to bounce back and should investors consider buying them?

Global asset manager Schroders (LSE: SDR) fell 27% over the last 12 months as fee income and assets under management declined. Rising interest rates and market volatility deterred investors, leading to net outflows. This isn’t a one-off. Schroders is down 47% over three years.

With a price-to-earnings (P/E) ratio of just 12.5 and a tempting trailing yield of 6.99%, it looks a bargain. But there’s a catch. Schroders has been a dirt cheap high-yielder for years, yet its shares keep falling.

Can Schroders shares reverse the slump?

The problem isn’t unique to Schroders. Many FTSE 100 financials are struggling as high inflation and interest rates dampen investor confidence. To thrive in 2025, Schroders needs sentiment to improve. That requires global stability, including how President-elect Donald Trump handles trade tariffs. Patient, long-term investors are likely to see rewards.

Housebuilder Persimmon‘s (LSE: PSN) another struggler. Its shares are down 22% over 12 months and 56% over three years.

There’s some optimism though. Persimmon’s stock jumped over 5% yesterday (14 January) after the board forecast full-year pre-tax profit at the upper end of expectations, supported by healthy completions. Despite higher mortgage costs and a slowing housing market, its average selling price rose 5% to around £268,500.

With a P/E of 13.5 and a yield of 5.39%, Persimmon looks appealing. But risks remain. The UK economy could slow, inflation might rise again, and higher mortgage costs could deter buyers. Resurgent inflation could also push up material and labour costs, squeezing margins.

I’m optimistic about Persimmon too

Still, there’s long-term support from the UK’s housing shortage. Demand exists if affordability improves. Should interest rates ease in 2025, Persimmon could rebound. I’d buy it, but I already hold rival Taylor Wimpey, which I also expect to recover from a 20%-plus drop over the last year.

My final underperformer is speciality chemicals company Croda (LSE: CRDA). It thrived during the pandemic as customers stocked up on its personal care and life sciences products, but they’ve since been winding down inventories.

Sales volumes and profitability slumped as a result, with unfavourable currency movements upping the pressure. Croda’s share price is down 31% over one year and 63% over three.

At some point, customers will need to restock, especially as the global economy improves. Croda’s innovative portfolio, with a focus on sustainable ingredients, positions it well for the future. Its investments in biotechnology and niche markets, including crop protection and pharmaceuticals, offer significant potential upside. The trailing yield’s 3.5%.

While its P/E of 18.6 isn’t exactly cheap, it’s far below the 30-times earnings multiple seen a year or so ago. Risks include volatile raw material prices and geopolitical uncertainty, but if Croda capitalises on its R&D, it should soon reassert itself.

Buying underperforming stocks can feel like a gamble. But the early stages of a share price recovery are typically the most rewarding. By waiting until they’re winning again, investors will miss it.

All three are worth considering, in my view. But strong nerves are required.

There were a number of FTSE 250 stocks that posted strong gains last year. One of the things I love about the UK mid-cap index is the ability to uncover some real gems across a number of industries.

Playtech (LSE: PTEC) was one of those gems for investors who owned the stock last year.
nfortunately, I wasn’t able to purchase Playtech shares before they jumped nearly 60% in 2024. The leap means they sit at £7.22 per share as I write on 16 January.

However, the gambling-focused technology company has shown up on my radar in recent weeks.

Why I’m watching

Recent gains aside, it’s the Playtech story that has really got me interested.

The company divested its Italian business, Snaitech, to Flutter Entertainment for €2.3bn (£1.9bn) in cash during September as it looked to streamline operations and free up capital for reinvestment or returning to shareholders.

A renewed focus on business-to-business (B2B) operations is something else I like given the potential to increase margins and capitalise on key growth markets.

Resolving a key dispute with Caliplay in Mexico was another factor behind the company’s surging share price as investors eyed a strengthened position in Latin America.

Why 2025 could be a good year

I think Playtech enters 2025 in a solid position, with a clear strategy and less baggage compared to 12 months ago.

Online gambling revenues continue to grow globally and Playtech’s technological advantage and strategic partnerships could be key.

This could also create some interest in the stock as a potential takeover target. While there’s no suggestion this is in the offing, any bids received would clearly need to offer shareholders a premium to the current share price to excite their interest.

Of course, there are plenty of reasons why Playtech may struggle to make further gains in 2025. Where there’s opportunity there’s also fierce competition, and the gambling industry is no exception.

Technology moves quickly, as do consumer preferences. Shareholders are also unhappy with a proposed €100bn (£84bn) bonus scheme following the Snaitech sale.

Set against a backdrop of economic uncertainty, these factors could mean 2025 is more challenging than many anticipate.

Valuation

While it may have a reasonable growth trajectory ahead, I do think Playtech is a touch overvalued right now.

Many gambling peers including Flutter are loss-making. That makes it hard to compare Playtech’s price-to-earnings (P/E) ratio of 23.6 to peers in a meaningful way.

I do see the tech side of wagering as a potential ‘winner takes all’ type of market. That’s where I mark Playtech down slightly, with its £2.1bn market cap significantly smaller than the likes of Entain (£4.3bn).

My verdict

I think Playtech is well placed as a technology-led provider in the growing gambling industry. However, I don’t think it’s one for me right now.

While online gambling revenues are up, I’m wary of how quickly consumer spending can change in the industry. Combined with ever-present regulatory changes and the stock feels a touch too rich for my blood at the current valuation.

Frasers Group (LSE:FRAS) was recently demoted to the FTSE 250. Since reaching a 52-week high of 920p last June, the company’s share price has fallen 36%. This was more than enough to see it relegated to the UK’s second tier of listed companies.

Like most retailers, it didn’t fare well from the Budget in October. The employer’s National Insurance hike is expected to cost an additional £50m a year.

Even so, I’m baffled as to why the company’s market-cap’s fallen by so much. At the time of writing (15 January), its stock market valuation is £2.6bn.

Lots of strategic investments

It’s well known that the group has an appetite for taking non-controlling stakes in other retailers. However, nobody really knows what its medium-term intentions are.

In December, it made a takeover bid for Norwegian sports retailer XXL ASA. And it wants to acquire luxury fashion label Mulberry Group. It’s also in a battle with boohoo to secure board representation. But it’s unclear what it intends to do with its other shareholdings.

In some respects, this doesn’t really matter as they have no impact on the company’s trading results. However, they do have a value.

The company last published a balance sheet dated 27 October. And this disclosed that these investments were worth £1.007bn. Since then, there’s been the usual ups and downs in the share prices of these companies. So to be prudent, let’s assume these shareholdings are now worth £950m.

This means the rest of the Frasers business is valued at £1.65bn.

Impressive earnings

And despite the additional employment costs it faces, it still expects to record an adjusted profit before tax (which excludes the movement in the value of its interests in other retailers) of £550m-£600m, during its current financial year.

Period	Adjusted profit before tax (£m)
52 weeks to 27 April 2025	550-600 (forecast)
52 weeks to 28 April 2024	545
53 weeks to 30 April 2023	482

Using the mid-point of this range, and assuming a corporation tax rate of 25%, it means the retailing side of the business is trading on an earnings multiple of less than four. I reckon my local corner shop would command a higher premium.

Ironically, if it wasn’t for the fact that nearly 75% of the group’s shares are owned by its founder, Mike Ashley, I think it’d be a takeover target itself. Unless, of course, he wants to take the company private.

Not for me though

But despite this astonishingly low valuation, I don’t want to invest. The stock appears to have fallen out of favour with investors. The company’s recent share price performance is a far cry from September 2022-September 2024, when it increased by an impressive 155%.

As there now appear to be more buyers than sellers for the stock, I believe something significant needs to happen for sentiment to improve. And other than launching takeover bids for one (or more) of the companies in which it’s invested, I don’t know what this could be.

In addition, I have a stake in its close rival JD Sports Fashion, whose share price has also tumbled in recent weeks. I don’t want to have too much exposure to one sector.

Contrary to a lot of expectations, the government’s first Budget hasn’t caused massive inflation – at least, not yet. And the Lloyds Banking Group (LSE:LLOY) share price surged on Wednesday (15 January) as a result. 

Shares in the UK’s largest consumer bank jumped 6.3% on news that the rate of price increases in December was lower than people were expecting. But how should investors react to this?

Inflation and interest rates

The latest inflation data from the Office for National Statistics (ONS) showed prices were 2.5% higher in December than the year before. And the FTSE 100 climbed on the news. 

Lloyds was one of the biggest beneficiaries. But lower inflation increases the chances of interest rates coming down at the Bank of England’s next meeting in February.

This isn’t necessarily a good thing for banks in general – or Lloyds in particular. When rates are lower, the margins banks earn on their loans tend to contract, weighing on returns. 

Inflation however’s worse. And this is why the Lloyds shares price caught such a significant boost from the news that prices aren’t rising at the rate they were 12 months ago. 

What inflation means for Lloyds

Inflation matters for Lloyds in a number of ways. The first issue is with its lending activities, where the return the bank stands earns on its loans goes down in real terms.

Another issue is with deposits. Savers also stand to earn a weaker return on their cash, but this increases the risk of them looking elsewhere for better interest rates to offset this. 

Third, the chance of borrowers defaulting on their debts is higher when prices are rising. Household budgets get more stretched and this makes it much harder for people to make their loan repayments. 

This can also weigh on demand for new loans. Given the effects inflation can have on its core banking operations, it’s probably not a huge surprise to see the stock responding very positively.

What should I do?

Investor sentiment has been all over the place recently when it comes to UK stocks. Cash flowed out of UK equity funds at a record rate before the Budget, but this turned around after the announcement.

Equally, concerns over inflation had been causing concerns. But share prices are rallying again as the latest news from the ONS indicates this isn’t as bad as initially feared.

When I buy stocks, I expect to own them at times when inflation’s high, low, or in between. And I strongly suspect the stock market volatility that’s been causing prices to fluctuate isn’t over yet.

As a result, I think buying shares in Lloyds – or any other company – just because the most recent CPI number was lower than anticipated is very risky. So I’m watching this one from the sidelines.

Nothing to see here…

Lower inflation makes Lloyds more likely to earn a decent return on the loans it makes, so the latest news is undeniably positive for shareholders. But this could turn around quickly.

The next update is due in February and if this isn’t so positive, the effect on the stock market could reverse. So from a long-term perspective, I don’t think this is something to pay much attention to.