Buyer interest in UK shares has settled back again in recent sessions. The November rally petered out rather quickly as Covid-19 concerns re-emerged. And the bullishness which pushed the FTSE 100 back above 6,500 points earlier in December has also run out of steam.
However, it’s possible investor appetite for UK shares could soar again in the days and weeks ahead. We could well be on the cusp of a spectacular Santa Rally if one or more of the following occur:
- Positive developments on the fight against Covid-19 emerge. Disappointing testing of AstraZeneca’s vaccine with Oxford University has tempered hopes that the corner has been turned. But approval could come soon and so better news on this front will boost hopes of a sharp economic recovery in 2021.
- Legislators in the US agree on new stimulus measures to support the economic rebound. Congress is currently debating the introduction of a $900bn coronavirus relief package. The deadline is tomorrow but Congress majority leader Mitch McConnell recently claimed that “major headway” had been made in Democratic and Republican negotiations.
- British and European Union negotiators manage to avert an economically-calamitous no-deal Brexit. There’s just a fortnight left before the UK is due to leave the trade bloc on WTO terms. But talks between both sides appear to have been more encouraging in recent days, with European Commission president Ursula von der Leyen commenting that there is now “a path to an agreement.”
2 cheap UK shares on my ISA watchlist
It’s too early to say that the new bull market is here, of course. But there’s clearly reason for UK share investors to be optimistic that recent stock market rally can continue in 2021.
Here are two top UK shares I’d buy for my Stocks and Shares ISA today. I think they could rocket in value during the new year:
#1: TI Fluid Systems
Car component manufacturer TI Fluid Systems is a great way to play the economic recovery. This is because demand for automobiles is one of the fastest things to pick up when broader consumer spending patterns improve. City analysts reckon this UK share’s annual earnings will rocket 289%, a figure which also reflects this manufacturer’s record of outperforming broader light production vehicles. Today, TI Fluid Systems trades on a forward price-to-earnings (P/E) ratio of 12 times. And this makes it a steal.
#2: Aviva
Life insurance demand during tough economic times isn’t as resilient as that for general insurance. However, sales of such financial products improve markedly when the economic landscape begins to improve. And this bodes extremely well for FTSE 100 giant Aviva. Now the business isn’t expected to record explosive annual earnings growth in 2021, unlike TI Fluid Systems. A 3% rise is predicted by City analysts. But I still reckon it’s worthy of serious attention at current prices. Aviva trades on a bargain-basement P/E ratio of 6 times and carries an enormous 7.2% dividend yield.