The FTSE 100 shed around 200 points last week to close just above 7,000 points. This is the lowest level since the beginning of March. Last time, the index rallied from this level in the space of a few weeks. Although past performance doesn’t guarantee future returns, with this dip I want to find the top shares to buy now. I’ve been doing my homework and think I’ve found some good options.
Picking some of the best performers
The move lower in the FTSE 100 impacted multiple stocks. Yet one sector that has held up relatively well over the past month has been banking. Only 14 stocks are in the black over this period, and they include Barclays, NatWest and HSBC. So should I buy? Well, I also need to consider longer-term performance before making an investment decision.
Given their resilience over time, I think some of the best shares to buy today are in this area. That\s especially so as the banking sector is continuing to benefit from central banks around the world hiking interest rates. Last Thursday, the Bank of England raised the interest rate by another 0.25%. This is the fifth back-to-back move from the central bank. On Wednesday, the US Federal Reserve announced a 0.75% jump in one go.
The fact that this trajectory shows no signs of slowing down is the main reason I want to buy banking stocks. The net interest margin reflects the difference in the interest rate the banks pay on deposits versus the rate charged on loans. The higher the base rate is, the larger the margin is that a bank can enjoy.
I want to buy shares in Barclays, NatWest and HSBC, but I need to be aware of the risk if the global economy falters later this year. All three companies have a large retail presence, especially in the UK. Any kind of recession here could hamper financial performance as spending dries up.
More shares I might buy
Another area where I want to buy the dip is in utilities. Over the past year, the SSE and National Grid share prices have gained 15% and 9% respectively. Yet in the past month, both shares have lost over 10% in value.
It was only a month ago when I wrote about the large scale investment that SSE committed to in its latest results. A £25bn package for electricity infrastructure has partly been made possible by the strong financial results for 2021. I think this sets up the renewable energy stock for more success in the long term.
As for National Grid, it also reported a rise in profits in the 2021 full-year results. It did note the cost of living crisis and high energy prices as being concerns for this year. I agree, and don’t think SSE is immune to these risks either. Yet I’m considering buying both stocks now as I think the utility sector is a defensive play against the broader UK economic situation.