Is now the time to start buying cheap ASX 200 shares? Here’s what UBS says

Although the S&P/ASX 200 Index (ASX: XJO) is having a very rosy day indeed this Tuesday, it doesn’t erase the awful year ASX shares have endured during 2022 thus far.

Typically, the ASX 200 Index has given investors an average return of around 8% per annum. That’s going off two decades of performance data from the SPDR S&P/ASX 200 Fund (ASX: STW). Yet this year so far, the ASX 200 has lost a painful 11%. And we’re still only in October.

Situations like the one we investors find ourselves in often prompt calls from value investors to ‘buy the dip’ and get shares on the cheap. That’s famously also the approach historically taken by the legendary investor Warren Buffett. So is now the right time to follow this advice and scoop up cheap ASX 200 shares?

Well, let’s see what one ASX broker reckons.

Broker: It’s time to buy cheap ASX 200 shares

According to reporting in the Australian Financial Review (AFR), broker UBS argues it’s a good time to pounce. This expert predicts the worries investors have been displaying over the year to date regarding rising interest rates and a possible recession are unfounded.

UBS is predicting the peak of the Reserve Bank of Australia’s (RBA) current tightening curve is almost upon us. As such, the current market downturn, according to the broker, is a great chance to pick up cheap ASX 200 shares.

UBS’s optimism comes from its own surveys. These predict household spending will remain resilient. That’s despite the recent run of RBA interest rate hikes.

Here’s some of what UBS strategist Richard Schellbach told the AFR:

Despite gloomy press headlines, and continued challenges from supply chain constraints, input cost pressures, and more recently labour market shortages, the reality is that the end demand which ASX businesses are seeing, continues to be undeniably firm…

The strength of the Australian economy, and resilience of its consumer, not just runs counter to many forecasts, but also runs against the slide we have seen in the cyclical sectors of the equity market.

Schellbach concluded by arguing that:

The share price moves seem overly pessimistic and present an opportunity to buy into some high-quality businesses with solid medium-term prospects.

No doubt these optimistic projections will be very welcome for ASX 200 investors today. But we shall have to wait and see what happens. If the last few years have taught investors anything, it is to expect the unexpected.

The post Is now the time to start buying cheap ASX 200 shares? Here’s what UBS says appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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