The rally that thrust UK share markets to multi-month highs in early November is grinding to a halt. It seems to be more than just a light bout of profit taking too. A string of worrying news suggests something more sinister could be afoot.
Positive updates over Covid-19 vaccines that helped lift share markets less than a fortnight ago are still streaming in. But a fresh spike in coronavirus cases is dampening optimism that the global economy could bounce back in 2021. The World Health Organisation now says the virus claims a life every 17 seconds.
Be prepared!
At this rate, it’s possible that economically-catastrophic lockdowns could persist well into next year. US unemployment levels are rising again as the infection rate marches higher, data on Thursday showed.
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And European Central Bank chief Christine Lagarde told the European Parliament in recent hours that “the euro area economy is expected to be severely affected by the fallout from the rapid increase in infections and the reinstatement of containment measures.”
The Covid-19 crisis has also raised the chances of a disastrous end to the Brexit process. It emerged yesterday that European Union chief negotiator Michel Barnier will be self-isolating following one of his team testing positive for the virus.
Brexit talks are now paused with a little over five weeks left until the end of the transition period. A no-deal withdrawal would harm the global economic recovery significantly, not to mention the earnings prospects of many UK shares.
6 UK shares on my radar
It’s clear then, that UK share investors need to be extremely careful before parting with their cash. News flow this week suggests the stock market rally of early November was built on sandy foundations. The profits outlooks of a great many British stocks remain less than encouraging, despite the rally. A large number of UK shares (like Cineworld and Hammerson, for example) continue to teeter on the edge of extinction too.
Still, the murky economic outlook won’t discourage me from buying UK shares. In fact, I’ve continued investing in my Stocks and Shares ISA in 2020, despite the shadow of Covid-19. And there are many options available to me even if the painful economic downturn persists.
I can buy defensive shares like utilities companies, for example. After all, our need for warm homes, working light bulbs and running water remain constant, whatever broader economic conditions are like. This makes National Grid and Pennon Group perfect picks for these uncertain times, for example.
I can invest in companies that provide buildings, contents, pet, or car insurance as well. Demand for these sorts of products remains constant during upturns and downturns. And I can choose from Admiral Group or Sabre Insurance Group, for example, to ride this theme. Or I can buy healthcare stocks for my ISA for the same reason.
Companies that operate in this field include pharmaceuticals colossus GlaxoSmithKline and medical testing specialist EKF Diagnostics. The list is endless, as are the opportunities to get very rich with UK shares.
