Looking at the chart of the Lloyds Banking Group PLC (LON:LLOY) (LLOY.L) share price for 2018, it seems to be on a continuing downward trend. Although there have been brief respites, it has generally delivered relatively consistent falls at a time when investor sentiment appears to have weakened considerably.
From my experience, trends can be persistent. Unless there is a piece of news flow which has the capacity to shift investor sentiment in a short space of time, I wouldn’t be surprised if further declines are ahead in the short run.
The weakness of the UK economy could act as a drag on the company’s stock price performance. And with the Brexit process seemingly challenging and potentially open to change as neither Parliament nor some of the EU’s members seem keen on the deal as it is, I think there could be further twists and turns ahead.
This could equal further pain for investors in Lloyds in my view. That’s in spite of the company having what I believe is a sound overall strategy. It has been able to put in place what appears to be a relatively efficient business model, with its cost to income ratio being enviably low compared to some of its FTSE 100 sector peers.
It has also strengthened its balance sheet in recent years in my view, and now compares relatively favourably to its industry peers. Although it lacks the international exposure of some of its industry rivals, I think that the company’s improved capital ratios may help it to deliver relatively strong performance in what is a tough wider UK economy.
Therefore, I think that if the wider economic outlook improves, the Lloyds share price could deliver a successful turnaround. I feel that it has a sound strategy and improving financial position. But in the short run, a weaker UK economy could lead to further uncertainty for the company and its share price in my opinion.