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Lately, I have been talking to a range of people about their outlook for the stock market – and I have had a wide variety of answers. The FTSE 100 may have hit new all-time highs repeatedly this year, but it still does not look nearly as expensive as its US counterpart. Meanwhile, those record highs could be signs that investors see value in the UK market – and that may continue.
On the other hand, though, the economic outlook seems fairly weak. Parts of the US market look significantly overvalued to me. If there is a serious market correction or even a crash Stateside, I imagine the UK will be swept up in the consequences.
So, what is an investor to do?
I’m not timing the market!
One approach would be to try and guess when the market will crash. After all, history tells us that it will sooner or later. The only question is when.
But while that crash could come as soon as this week, it might also not arrive for decades.
Staying out of a soaring market in fear of a crash can sometimes bring a massive opportunity cost for investors.
Market timing is simply impossible to do with total confidence. While the guesswork or estimates can sometimes end up being correct, they are often far wide of the mark – and nobody knows in advance which it will be.
Hunting for great quality at the right price
Instead, my approach is to ask the same question I always do as an investor, regardless of the market noise.
That question is borrowed from billionaire Warren Buffett. It is whether I can see any opportunities to buy into what I think are great businesses, at attractive prices.
Although the FTSE 100 has been riding high, with 100 diverse firms making it up it is inevitable that some will be doing better than others when it comes to valuation. That presents investors with an opportunity.
Fallen star among the blue chips
For example, one FSTE 100 share I think investors should consider is distiller and brewer Diageo (LSE: DGE).
The strong recent performance of the blue-chip index is not thanks to this member.
Diageo’s share price has performed woefully, in fact. It is down 29% so far this year. That compares to a 16% gain in the FTSE 100 index since the start of 2025.
There are good reasons for Diageo’s lamentable stock market performance.
Demand for premium spirits has been falling in many markets. Guinness shortages in some key markets have raised questions about the robustness of Diageo’s supply chain and demand planning. Longer term, young consumers shunning alcohol is a risk to sales and profits.
So, what do I see to like here (and why have I been buying Diageo shares for my portfolio this year)?
For starters, there is a well-oiled distribution network and brilliant portfolio of premium brands. I also like Diageo’s business model, which has long delivered strong profit margins.
It has raised its dividend per share annually for decades. The FTSE 100 company remains hugely cash generative. Over the long term, I expect that to remain the case.
