5 UK shares I’d buy to profit from the stock market rally

Last week, UK shares hit an all-time high. I think there’s a strong chance the stock market rally could continue as the economy moves on from the pandemic. As such, I’ve been looking for stocks to buy for my portfolio to ride the recovery. 

However, I’m also aware that another wave of coronavirus could set the reopening back several months. Therefore, I’m focusing my efforts on UK shares that have the potential to grow no matter what the future holds for the UK economy. 

High-quality UK shares

Two companies I’d buy today are Spirent Communications and XP Power. These organisations are not economic recovery plays in the traditional sense. Instead, they’re major infrastructure providers for the telecommunications sector. They’re also significant suppliers of 5G communications equipment.

Forecasts suggest the 5G communications market will explode in size over the next decade. Spirent and XP could be two of the primary beneficiaries of this trend.

That said, the market is incredibly competitive. There’s no guarantee these businesses will be able to profit from the industry’s growth as other lower-cost peers may grab market share.

Nevertheless, I’d buy these two tech champions as a way to invest in the stock market rally. 

Recovering jobs market

As direct investments in the global economic recovery, I’d also buy UK shares SThree and Pagegroup. The pandemic has severely impacted the recruitment sector. However, these businesses are incredibly resilient. Staffing is their only significant cost, and profit margins tend to be relatively high. 

While it could take some time for the global recruitment industry to recover to levels of activity seen in 2019, I think these businesses have the potential to generate large profits when the market recovers. They’ve shown a willingness to return substantial amounts of cash to investors in the past when profits are high. 

Still, there’s no guarantee the recruitment market will recover quickly. This could hold back growth at these businesses for the foreseeable future. The recruitment market is also usually the first sector to feel the pain of any economic downturn.

As such, these aren’t investments for the faint-hearted. But I’d be happy to add them to my portfolio to profit from the stock market rally. 

Riding the stock market rally 

The final company I’d add to my basket of UK shares is homebuilder Redrow. The UK housing market is booming and, as demand outpaces supply, it doesn’t look as if this trend will come to an end any time soon. Low-interest rates are adding fuel to the fire and, once again, it doesn’t seem as if the Bank of England is going to hike interest rates anytime soon. 

This is the perfect environment for homebuilders like Redrow. That’s why I think this is one of the best UK shares ways to invest in the stock market rally. 

The company’s principal risks are government legislation to encourage homebuilders to build more, rising costs, and the potential for interest rates to increase. All of these challenges could have a significant impact on group profits and expansion plans.