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British stock investors are clearly upbeat about the New Year. Prices of UK shares are flying and the FTSE 100 is within a whisker of new record highs.
A survey released by investment firm eToro underlines the strength of investor optimism today. It shows that the majority of British stock pickers expect to make a profit in 2023.
Positive thinking
eToro says that 53% of the 10,000 people it questioned expect to make a positive return on their investment this year. That compares with 37% who predict a loss and 10% who said they didn’t know.
Ben Laidler, global markets strategist at eToro, notes that “while there is plenty of uncertainty about the economy, it seems for many investors [that] this pessimism is already baked into share prices”.
Laidler says that a full market recovery isn’t certain in the near term due to issues like high inflation, rising interest rates, and the war in Ukraine. But he adds that the 2022 bear market provides many opportunities for investors “to buy up quality companies at knocked-down valuations”.
eToro says that two-thirds of UK share investors are “either positive or ambivalent about the bear market”. Conversely 33% of those surveyed say their investment appetite had suffered from recent stock market meltdowns.
Finally, eToro notess that “there has been an uplift in sentiment globally” in recent months. Some 69% of respondents said they felt confident in their portfolio in quarter four, up 5% from the prior three months.
Mixed signals
The consensus among economists is becoming increasingly confident for the year ahead. Indeed, a slew of positive comments at the end of last week bolstered the sense of optimism even further.
IMF chief Kristalina Georgieva told delegates at Davos that the economic outlook is “less bad than we feared a couple of months ago”. The organisation announced plans to increase its growth forecasts earlier in the week.
But the forecast for the global economy — and by extension for corporate profitability — still remains highly uncertain. Question marks loom over the impact of looser Covid-19 rules in China, for example.
European Central Bank chief Christine Lagarde predicts that softer restrictions will boost inflation by boosting Chinese energy consumption. Others have predicted that price rises will slow as supply chains return to normal.
Here’s what I’m doing now
There are many tactics investors can adopt in this uncertain environment. One strategy I’m using to make a positive return in 2023 is to invest in UK dividend shares.
It may be difficult to achieve strong capital appreciation if the economy flatlines or weakens. So buying income-paying shares with robust balance sheets could be the best way for me to try and make a profit.
Buying non-cyclical stocks is another idea I’ve used in recent months. Companies like electricity producers, defence contractors, and food producers could still deliver decent profits regardless of broader economic conditions.
There are great opportunities for UK share investors to make money in 2023. Even if the world economy remains weak I expect to make a decent return on my cash.
