The month of November has provided much-needed relief for stressed UK share investors. News of a Covid-19 vaccine has fuelled speculation that the global economy could stage a robust rebound in 2021. It’s also led to hopes that we could be on the verge of a new bull market.
UK share markets have responded strongly to recent news on the coronavirus front. The FTSE 100 for example has rocketed 15% in value in November. Britain’s blue-chip index has struggled for traction in more recent sessions, but its ascent in the first couple of weeks was spectacular. More positive news on the vaccine front will bring the bulls out in force again.
I don’t think UK share investors should take anything for granted, though. Key questions over the effectiveness and the eventual rollout of a Covid-19 vaccine are still to be answered. And on top of this, other key issues like Brexit and rising trade tensions between major economies also cast a pall over the global economic recovery.
Let’s say that encouraging testing of a Covid-19 vaccine is the first stage of an economic rebound, though. Which UK shares could explode in value in 2021? Here are several top stocks I think could soar during a new stock market rally:
#1: Consumer goods companies to soar?
Manufacturers of personal care and household goods are perfect for times like these, in my opinion. Fast-moving consumer goods (or FMCG) giants like Unilever, Reckitt Benckiser Group and PZ Cussons have the brand power and the essential product stables comprising soaps, disinfectants, over-the-counter medicines and so on that remain in strong demand, whatever happens to the global economy. Profits at UK shares like these should remain robust, even if the economic recovery splutters.
However, companies like these also have the potential to roar during any upturn. This is because improved consumer spending lifts demand for discretionary and essential products alike. These particular FTSE 100 and FTSE 250 shares have actually risen in value in 2020 thanks to their excellent defensive qualities. And I reckon they could roar higher next year.
#2: Strong software demand to boost these UK shares?
Shares that provide software and computer services could also rise strongly should a strong economic recovery happen in 2021. Historically, profits at such companies tend to move higher during the middle part of the economic cycle. The rise of digital in recent years means that earnings here could rebound more quickly than in previous cycles, however, as businesses invest to ride the digital revolution.
There are plenty of top-quality UK shares in this area that have caught my eye. I like CloudCall Group and iomart, for example, as they are great plays on the cloud computing boom. I’m a big fan of Kape Technologies and Avast as well, because of their focus on the increasingly-important field of cybersecurity.