2022 has been a painful year for many UK shares and investors alike. Record high inflation, rising interest rates, a manufacturing slowdown in China, a labour shortage, and a tragic conflict in Eastern Europe all landing simultaneously don’t exactly create a favourable operating environment. Yet it might soon end.
Stock prices have already collapsed by double-digits on high levels of investor fear. But, in my opinion, this downward trend will quickly reverse once some positivity returns to economic data. And that might soon be on the horizon. Oil and, in turn, fuel prices have already begun to tumble, raw materials and other commodities are following suit, and even mortgage rates are starting to slide.
To me, this is starting to look like the beginning of the 2022 stock market recovery. So with that in mind, here are seven UK shares I think offer sound rebound potential for my portfolio this year.
Retail opportunities in the FTSE 100
With the fall in consumer spending, some retailers have been suffering considerably. Yet these woes may soon be a thing of the past for the likes of Tesco, Next, Ocado, and B&M European Value.
Depending on the severity and duration of future inflation, these UK shares may begin to lose market share. After all, there are alternative discount retailers potentially offering more attractive prices. And this fear seems to be impacting investor sentiment since the share prices of all four have been a bit shaky since the start of 2022.
Yet the management teams continued to re-invest in both their physical and online presence. In my opinion, this lays solid foundations for growth once the storm has settled and retail sales pick up again. Plus, each has accumulated large cash buffers to meet its short-term obligations. Therefore with the stock already depressed by low expectations, I feel these businesses could be excellent value additions to my portfolio.
Best UK shares to buy now?
Recently, shares of alternative and traditional banking groups like Alpha FX, Lloyds and Barclays haven’t been given much love. Despite rising interest rates creating an ideal lending environment for the latter two, these stocks aren’t heading in the right direction. Why? Because a reduction in consumer spending isn’t good for business, neither is inflationary pressure driving up operating costs.
However, once the Central Banks begin to get inflation under control and the stock market recovery gets underway, I suspect many investors will change their tune. And with more businesses eventually seeking the services provided by these institutions, it opens the door to growth. At least that’s what I think.
But there are, of course, risks. Suppose the worst-case scenario were to occur and the UK falls into a recession? In that case, all three UK finance shares would likely continue their downward trajectory.
Regardless, as a long-term investor, I’m not too concerned. History has demonstrated that businesses can adapt during recessionary times. And I don’t foresee the need for banking solutions disappearing anytime soon. That’s why I’m considering these stocks for my portfolio.
The post 7 UK shares I’d buy now to capitalise on the stock market recovery appeared first on The Motley Fool UK.
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Zaven Boyrazian has positions in Alpha FX. The Motley Fool UK has recommended Alpha FX, B&M European Value, Barclays, Lloyds Banking Group, Ocado Group, and Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.