The current heatwave is wonderful and exhausting at the same time. The volatility in the stock market during this summer has had the same impact on me! Yet looking ahead to the autumn, some are expecting a stock market bounce as inflation starts to peak and then moves lower. Here are some of my picks for the best shares to buy for my portfolio in this case.
On the front line of higher consumer spending
If inflation does start to ease towards the end of the year, I think consumers might have greater confidence in spending over the festive season. Further, although it’ll take many months for lower costs to reach the consumer in lower prices, more optimistic year-end trading updates could be published.
As a result, I think retailers could be an interesting play right now. Given the current difficulties, many have seen share price falls so far this year. For example, I’d be keen to buy JD Sports Fashion and B&M European Value Retail. Both stocks have fallen by over 25% in the past year.
I do admit that an autumnal bounce might still see investors focus on buying value stocks. In that case, these retailers might still struggle to perform. But if spending does pick up, then these two companies should feel the impact straight away.
Improving sentiment from conflict resolution
If the stock market bounce is driven by a peaceful end to the war in Ukraine, or by de-escalation with China and Taiwan, general market sentiment should improve.
Even if this doesn’t happen, Western companies might be able to reopen stores and operations in certain countries. For example, McDonald’s announced last week that it was reopening stores in Ukraine shortly.
For this idea, I’d buy Coca-Cola HBC. The company has a manufacturing plant in Ukraine that’s currently closed, as well as enjoying revenue from Eastern Europe.
On another angle, I think it would be a smart move to buy shares in Glencore. Commodity prices (including the agricultural division) will likely see further volatility on any conflict ending. This is because supply would suddenly come back on the market. As a global commodity trader, Glencore would be poised to benefit from this.
My risk here is that we could get a stock market bounce even with wars and conflicts continuing. So my ideas might not perform as well as other stocks as the underlying reason for the rally is different.
Diversifying my best shares to buy now
It’s impossible to perfectly predict any market rally, and even harder to pinpoint the potential driver behind it. That’s why I’m thinking about buying all four shares as part of my wider portfolio.
The advantage is that I can diversify my risk. It gives me a variety of opportunities to profit from depending on what actually happens in the future. Sure, some might not pay off, but if I own one outperformer that takes off, it makes up for all the rest.