Reasons To Be Cheerful

With the economy unstable, recession looming large and credit still hard to come by, it's no wonder many Brits are feeling blue. But there are still reasons to think positively. Here are six.

1. Shares are cheap

While October has seen a shocking number of stock market highs and lows, and although it's impossible to predict what will happen in the months to come, there's little doubt some people will see now as a good time to buy shares.

With the FTSE hovering around the 4000 mark -- a level first seen 11 years ago -- buyers can effectively enter the market at 1997 prices.

Dividend yields are also healthy on some shares. This month the incomes from major companies such as BP, Shell and Vodafone have at times far outstripped the returns currently available on cash investments.

FTSE Index Trackers also seem to have enjoyed a surge in popularity over the past few weeks. My fellow Fool Stuart J. Watson explains why in this excellent article.

2. Food, fuel and energy are getting cheaper

The rising cost of essentials such as food, fuel and energy has done a lot to depress people over the past year. However, the prospect of recession seems to have pricked these inflationary bubbles -- and prices have started to slide.

Supermarkets' price-cutting has become increasingly aggressive, and extends to petrol and diesel prices as well as groceries. Countries such as India and China, whose growth was driving up food prices, have also been affected by the global financial crisis -- so this pressure has started to ease.

Recent data from market researchers TNS Worldpanel suggests food price inflation has peaked, so prices for consumers should now begin to fall. Meanwhile, the prospect of recession has sparked a drop in the value of oil, which should affect prices at the pumps.

Combined with a decline in the wholesale cost of gas and electricity, this is also likely to have an impact on energy costs. The gas and electricity price hikes predicted for spring 2009 may now be smaller than expected, or not take place at all -- and that's great news for everyone feeling the pinch after this summer's hefty increases.

3. Savings rates are super

So far, savings rates have benefited from the credit crunch. Even now, despite the recent 0.5% cut in the Bank of England base rate, some accounts are paying more than 6% on balances.

However, this could soon change. Some economists predict interest rates are likely to fall significantly over the coming months, and institutions will probably pass on these cuts to savers.

If you want to bag a good, fixed rate savings deal, you might want to consider opting for a savings bond -- and doing so sooner rather than later. Just remember, you should only do this if you're sure you can afford to lock your money away for a prolonged period.

4. Mortgage rates may fall

While many homeowners are worried about negative equity or are having difficulty remortgaging, there are ways in which some might benefit from an economic downturn.

For example, those with tracker mortgages benefited from this month's base rate cut because their mortgage rates fell in line with the Bank of England's decision. What's more, they'll see the monthly cost of their mortgage shrink further if interest rates continue to decrease.

However, those with discount rate mortgages and anyone paying their lender's Standard Variable Rate (SVR) may find their bank or building society is slow to pass any reductions on to them, as my Foolish friend Donna Werbner explains here.

And anyone with a fixed rate deal might be left feeling disgruntled if rates go down dramatically: the cost of their mortgage will remain the same until the price-fixed portion of their deal ends, so any base rate cuts won't be helpful for them.

5. Property buyers could be better off

According to the latest survey from Nationwide Building Society, house prices fell for the twelfth consecutive month in October. The average house has fallen in value by almost 15% since this time last year -- which equates to a drop of around £30,000.

Of course, this is terrible news for homeowners who bought recently or those who are trying to sell their homes. But if this downward trend continues, first time buyers previously priced out of the market will find it easier to get a foot on the property ladder. Similarly, anyone who wants to upsize to a more expensive property should find the benefits outweigh the costs.

Moreover, even though many mortgage lenders are still demanding deposits of at least 10% from buyers, the actual sums required to achieve this will be smaller if prices continue to decrease.

6. Some businesses will benefit

While many retailers are likely to suffer during a recession, there will be winners as well as losers.

`Deep discounter' supermarkets such as Aldi and Lidl have already seen their fortunes improve this year, while Morrisons and Asda have also increased their market shares. Meanwhile, sales of Domino's Pizza have increased by almost 20% in the UK and Ireland since the start of 2008. Apparently, we've all taken to ordering in instead of heading out to restaurants!

Online retailers predict this Christmas will see business boom, as shoppers seek to cut costs by buying gifts via the worldwide web. And dating services such as MakeFriendsOnline and PlentyMoreFish say the credit crunch has had positive consequences for them. It seems people want to meet prospective partners, but aren't keen on doing so if it means paying for an expensive night out!

The big picture

Whatever reasons to be cheerful we can find, I accept they have to be seen in a wider context. If and when it hits, a recession is likely to lead to redundancies, repossessions and much misery for some people.

But the dark days will be temporary, and we will get through them. And in the meantime, I believe there's little we can do apart from stay as positive as possible.

So if you can think of more reasons to be cheerful, why not post your thoughts in the comments space below?

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