The Lloyds Banking Group (LSE:LLOY) share price is currently trading just under 50p. It’s up 37% over the past year. However, this does take into account the strong rally as part of the wider FTSE 100 at the back end of last year. If I look at the Lloyds share price over the past six months, it’s only up 1%. In order to break above 50p and make a move to 55p before 2022, it needs something to happen. Here are two potential factors that I think could cause a shift higher.
A rate hike boost for Lloyds shares
The major thing that could cause a material move higher in the Lloyds share price is the Bank of England meeting on 16 December. It’s the last meeting of the year, and one that carries with it large expectations of an interest rate hike. The central bank was widely expected to raise rates at the meeting at the start of this month. In a surprise turn, the committee voted 7-2 not to raise rates at all.
5 Stocks For Trying To Build Wealth After 50
Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.
Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…
We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.
I wrote the day after about how this was the driver that knocked Lloyds shares down by 4.5%. It shows how sensitive the stock is to what happens regarding the policy on interest rates.
The main issue behind this is the fact that Lloyds is a traditional retail bank. One of the key ways it makes money is in the difference between the rate it charges when it lends money out, in comparison to the rate it pays on deposits coming in. This is known as the net interest margin. So higher interest rates essentially allow the bank to make a larger margin.
If we see a rate increase in December, I think this could provide a booster to the Lloyds share price to get it to 55p or higher.
Economic data and Covid-19 figures
Another key driver for the Lloyds share price is the overall state of the UK economy. The correlation here is mainly down to the fact that Lloyds is a heavily retail-focused bank. This means that the success of the bank is largely dictated by how well the average person performs. If the average person has a job, spends frequently and has a mortgage, then the bank has multiple ways to generate revenue.
So far, the UK economy has been recovering from the impact of Covid-19. But we’re heading into winter, which could push the infection rate higher. Yet at the same time, recent comments from the Government have shown that there’s currently no desire for another lockdown, or for any change in plan on restrictions.
If this remains the case, and if we see hospitalisations and the death rate remaining low as we head to the end of the year, I think this would support the Lloyds share price. In terms of key economic data to watch out for, I’m keeping an eye out for the December unemployment and inflation figures.
Although I’m optimistic about the above points, I could be wrong. The main risk to my view on the Lloyds share price is if the Bank of England again disappoints and doesn’t hike rates. This, combined with Covid-19-driven restrictions, could see the stock nosedive.
Overall, I’m considering buying Lloyds shares as we head towards the end of the year.
FREE REPORT: Why this £5 stock could be set to surge
Are you on the lookout for UK growth stocks?
If so, get this FREE no-strings report now.
While it’s available: you’ll discover what we think is a top growth stock for the decade ahead.
And the performance of this company really is stunning.
In 2019, it returned £150million to shareholders through buybacks and dividends.
We believe its financial position is about as solid as anything we’ve seen.
- Since 2016, annual revenues increased 31%
- In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
- Operating cash flow is up 47%. (Even its operating margins are rising every year!)
Quite simply, we believe it’s a fantastic Foolish growth pick.
What’s more, it deserves your attention today.
So please don’t wait another moment.
Get the full details on this £5 stock now – while your report is free.
Jon Smith has no position in any share mentioned. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
This post was originally published on Motley Fool