Taking a look at a graph of Lloyds (LSE: LLOY) shares over 5 years is perhaps slightly underwhelming. Whereas, admittedly, the price has recovered most of its 2020 losses, it’s nonetheless down 5% since mid-2019. 

However this 12 months paints a wholly totally different image.

The share price faltered slightly because the 12 months started however since hitting a low of 41p in February it’s made a spectacular comeback. Now up 35% at 55.4p, the price is inching ever nearer to a brand new five-year excessive.

Can it crack the 70p stage in 2024? Let’s take a look on the components which can be for and towards it.

An economic system in limbo

The UK economic system is at present a bit wobbly, to say the least. It’s actually doing higher than final 12 months, I’ll give it that. However issues aren’t precisely stable.

The FTSE 100 has hit new highs and investor sentiment appears usually constructive. However nonetheless, huge corporations like ARM Holdings and Flutter have just lately jumped ship for the US. Even the index’s largest vitality firm, Shell, is threatening to hop throughout the pond. And, the sudden and sudden election provides an entire new twist. If the result causes additional turbulence within the nation, extra locally-listed corporations might begin eyeing international shores. 

Inflation has lastly fallen to the Financial institution of England’s 2% goal however when precisely rates of interest could also be reduce stays unconfirmed. They’re a little bit of a double-edged sword for banks — chopping earnings from loans but in addition lowering the danger of dangerous money owed.

All of that is pertinent to Lloyds’ share price because it’s intently tied to the UK’s financial well-being. 

And the excellent news?

If all goes nicely within the election, Lloyds stands to profit from the financial prosperity that would observe. Falling rates of interest mixed with a bolstered job market ought to enhance mortgage approvals whereas lowering the danger of defaults. This could permit the financial institution to redirect capital put apart for dangerous debt allowance into extra profitable investments.

The financial institution’s steadiness sheet is stable and financials are agreeable. The shares are probably undervalued by round 15% based mostly on future money circulate estimates, and the price-to-earnings (P/E) ratio of seven.7 is on par with the business common. As such, analysts don’t anticipate big progress from right here however are usually extra constructive than detrimental.

The explanation I’m holding my shares

My shares are at present up by round 10% since I purchased them. The share price might climb even additional this 12 months however extra importantly, I ought to nonetheless profit even when it doesn’t.

Why?

As a result of Lloyds boasts a pretty dividend yield of 5%. And though its latest monitor report was mired by the pandemic, traditionally it’s been a dependable payer. Including collectively each the yield and price progress over the previous 12 months, shareholders have loved close to 30% returns. I don’t anticipate that form of progress to proceed however even when it does half as nicely, it’s nonetheless greater than common.

Total, I’m constructive about Lloyds.

Optimistic sufficient to throw extra cash in? Perhaps not proper now. However I’ll revisit that call after the election.