Are stock markets still cheap?

Global share prices have fallen since the start of the year but are starting to creep up. So can investors still buy shares at a bargain price? Lauren Almeida reports

Global stocks have slumped since the start of the year as rampant inflation, rising interest rates and war in Ukraine spooked markets. Some investors have used the falls to their advantage, buying stocks at much cheaper levels than were available six months ago – but this window may now be closing. A month after the Russian invasion, stocks around the world have started to rebound as investors tentatively return to riskier assets.

The FTSE All World index, which tracks the global share prices, is already 5pc higher than on Feb 24, when Russia invaded Ukraine and sent markets tumbling. Even gold, traditionally viewed as a safe-haven asset during periods of market stress, has failed to deliver returns on a par with global stocks.

Meanwhile the Vix, an American index that tracks stock market volatility, stands 24pc below its level on the day of the invasion.

If markets are rising again, how long can investors keep “buying the dip”? Telegraph Money seeks some expert opinion.

BRITAIN While global markets tumbled, falls in the London market were short-lived. Jason Hollands, of the broker Bestinvest, said Britain remained one of the few truly undervalued markets.

“British companies have done well this year but they still trade at a 25pc discount to their global rivals,” he said. Mr Hollands highlighted the Artemis UK Select fund, which invests in bluechip British stocks, such as Barclays and Tesco, and has gained 42pc in the past three years.

He also named the Fidelity Special Situations fund, another UK fund that buys “value” stocks. “The manager, Alex Wright, targets unloved companies such as the oil giant Shell,” he said.

The Temple Bar Investment Trust was another of his picks. It invests in companies, such as Royal Mail and Centrica, and trades at a 3pc discount to the value of its assets.

AMERICA While the American stock market has been the most lucrative over the past decade, it has suffered in the past few months as the prospect of rising interest rates affected the value of its fastgrowing companies. The Nasdaq, which tracks America’s largest technology companies, has shed 12pc since January.

But David Henry, of the wealth manager Quilter, said its 5pc rise this week suggested that technology stocks could be coming back into favour.

He added that investors with a healthy risk appetite should consider returning to “quality” companies in the sector such as Microsoft, Apple and Amazon. “These shares are by no means cheap relative to the rest of the market,” he warned. “But they are trading at lower levels than six months ago and they have very reliable earnings.”

Andy Merricks, of the wealth manager 8AM Global, said cybersecurity stocks looked particularly compelling as war in Europe fuelled fears of cyber warfare. He pointed to CrowdStrike, an American cybersecurity specialist, which has rallied by as much as 31pc in the past four weeks.

“Companies in this sector will never be cheap when you compare them against others,” he said. “But you cannot get their long- term growth potential anywhere else. That’s why it’s important to drip feed money gradually into your portfolio, so you don’t miss out low entry points.”

EMERGING MARKETS Mr Hollands said investors who were looking for value opportunities might consider turning to emerging markets.

“This is a high-risk area, as proved by the state of Chinese markets at the moment,” he said. The Hang Seng index, which follows the largest companies listed in Hong Kong, has dropped by 3pc in the past month.

“The stocks have suffered from a recent lockdown in a major manufacturing city as well as a continued regulatory crackdown in the technology sector. Falls in Chinese stocks have impeded the emerging market sector, but they are now trading at very cheap levels. What’s more, while Western central banks are tightening their monetary policy, China is lowering interest rates, which should be supportive for growth,” Mr Hollands added.

Mr Merricks tipped the Veritas Asian fund, which invests in Chinese companies such as the machinery specialist Shenzhen Inovance Technology, as well as Indian conglomerates such as Tata Consultancy Services. However, he warned investors against trying to time the market. “If you managed to buy at the bottom, that is great, but it is often just luck,” he said.