The FTSE 100 soared rapidly on Monday, seeing its largest one-day gain since March. The exciting gains came after the pharmaceutical giant Pfizer announced news of a coronavirus vaccine. The vaccine being developed by the firm and BioNTech could be 90% effective in preventing people from getting the virus.
The partnership is one of 12 globally that is in the final stage of testing but is the first to announce any results. In what could be a game-changer for FTSE 100 and worldwide stocks, the US and German companies said they could supply 50m doses this year and 1.3bn doses in 2021.
FTSE 100 soars higher
The FTSE 100 index was driven higher by beaten-down sectors including airlines. Shares in the engineering giant Rolls-Royce gained over 43%, and British Airways owner IAG closed the day 25% higher. These look like phenomenal one-day gains, but it’s important to remember that these stocks are down around 60%-70% this year, and are still well down, even after today’s significant gains.
The vaccine news could provide a turning point for these cheap UK stocks though. There is now some reason to be optimistic about a potential economic recovery next year. A successful vaccine could allow life to return to normal and I reckon the UK public is itching to go on holiday. Demand should be strong once the pandemic recedes.
Yet it might be prudent to be only cautiously optimistic about this latest vaccine news. Yes, it provides some hope for the future, but uncertainties remain. There’s still a long road to confirming, producing, and supplying any vaccine. It takes time.
Nonetheless, it could be the start of a recovery in beaten-down FTSE 100 shares. I expect volatility to remain as the market continues to digest vaccine, Covid-19, and US election news. But any short-term downside in share prices could be a good opportunity to invest in cheap UK stocks in anticipation of a strong recovery in 2021.
Cheap recovery stocks I’d consider
In addition to airlines, I believe the FTSE 100 stocks that stand to gain in an upcoming recovery include hospitality giants such as Whitbread and Compass Group. As economic activity returns to pre-covid levels, I reckon hotels and restaurants should benefit considerably.
Shares in FTSE 100 real-estate investment trusts such as British Land and Land Securities Group could benefit from expectations of UK workers returning to offices, shops, and restaurants. In 2020, these property giants suffered as people were told to work from home and shoppers switched further to shopping online.
Shares in the FTSE 100-listed banks could benefit from a recovery too. Names such as Lloyds Banking Group, Natwest Group, and HSBC are amongst the worst-performing FTSE 100 stocks so far this year. With share price losses of between 35% and 50% year-to-date, there’s significant room for recovery.
I reckon I could make significant returns by buying these cheap UK stocks before a recovery takes hold.