Should I scoop up UK shares right now – or wait?

Markets have been jittery lately due to problems in the banking sector, especially in the US and Switzerland. That has pushed down the price of some UK shares to a level I find tempting.

For example, when I write on Monday morning, I can buy M&G Shares at a price that gives me a prospective yield of 11.5%. For FTSE 100 the company that raises the annual payment of 7% this month, that sounds interesting to me!

But I think the current stock market volatility signals investor nervousness about the economic outlook. The proposed takeover of Credit Switzerland the price was lower than the new share price and some bondholders lost heavily. That could lead to shocks in global stock markets this week and next, in my view.

So should I buy what I think are UK stocks now – or wait to see what happens?

I’m waiting

In short, I have no plans to enter the stock market in the next few days even though some stocks look like bargains to me.

Take Legal & General precedent. The FTSE 100 insurer has been on my watchlist for some time. I have been hoping to add it back to my portfolio at an attractive price. This morning I was able to buy the stock at a price-to-earnings ratio of 6, with a dividend yield of 8.8%. That looks really tempting to me.

Wait and see

But there is a reason that UK stocks like M&G and Legal & General have lost value. Investors are trying to assess what the future holds for the global economy – and the answer seems hard to predict.

Many people had never heard of Silicon Valley Bank earlier this month despite its size, but Credit Suisse is a major Swiss bank. It has effectively imploded in a few days, despite receiving a massive liquidity boost just last week from the Swiss central bank.

That makes me even more nervous about what the next year or two will bring to the market. Banking depends on trust. Lately, trust has become increasingly fragile. It is possible that other banks with solid businesses could be caught in the current crisis, despite having strong balance sheets.

That helps explain why financial services stocks are currently struggling. But why am I also now not planning to buy more UK stocks at low prices this week?

A banking crisis can have major implications for other sectors, from the drying up of credit needed to run businesses to a drop in consumer confidence that disrupts sales. To assess whether a company is a bargain, I like to look at what I think are its long-term prospects. That is even more difficult to do now, given the dramatic and fast-paced events that have taken place in the global banking sector.

Get ready

Still, I maintain a shopping list for the next stock market crash, whenever that may be. So if the price of a given stock in that list drops far enough in the coming days or weeks, would I be willing to buy it?

I will – as long as I felt the price I was paying for each share was significantly below what I thought its long-term value should be.