The last stock market crash occurred in spring 2020, when investors around the world were knocked for six by the arrival of Covid-19. But as well as reminding us to expect the unexpected, the pandemic also taught us the benefits of long-term investing.
Don’t believe me? Just take a look how at this FTSE 100 stock’s rebounded since those dark days of six years ago.
Who?
At the end of March 2020, Barclays‘ (LSE:BARC) share price was 94p. Today (1 August), I would have to pay 442% more (416p) to buy one.
That’s a remarkable recovery and shows the potential rewards on offer to a brave investor with some spare cash. As billionaire investor Warren Buffett famously once advised: “Be fearful when others are greedy, and be greedy when others are fearful“.
Of course, timing the market is a mug’s game. Very few people are clever (lucky?) enough to buy at the bottom and sell at the top. But a well-run quality company, like Barclays, should continue to grow its earnings over the long term. Yes, there might be a few wobbles along the way but, generally speaking, the overall trend should be positive.
Right place, right time
Indeed, Sir Philip Augar, the author and former equities broker, told the BBC on 28 July that market conditions were “pretty much ideal” for the UK’s banks. He said interest rates were in the “perfect zone“. And that there was a “nice margin” between the amount of interest paid to depositors and that earned from borrowers.
Barclays’ results for the six months ended 30 June (H1 26), released on the same day, proved his point. It reported a profit before tax of £6.07bn, 16.6% higher than for H1 25. This was also 2.1% ahead of analysts’ expectations.
So why did investors send the shares 4.8% lower on the day?
Not good enough
One explanation is that although the bank’s equity division performed strongly (revenue was up 45%), analysis by Reuters showed that its Wall Street rivals had performed better.
Otherwise, it’s hard to understand the investor reaction. Perhaps some took the opportunity to take a profit? Or maybe, they are concerned that the country’s new Prime Minister could impose a windfall tax to help fund more government spending?
My view
Personally, I think this fear’s misplaced. Although banks have a poor reputation with voters, it’s grudgingly acknowledged that a healthy financial services sector’s needed to help promote economic growth. I suspect any change to the tax regime would be minor. And in my opinion, Barclays is financially strong enough to easily cope.
