Stock market rally: Biden win lifts the FTSE 100 to 3-month high. I’d buy these stocks now

FTSE 100 got a double boost today from Biden’s win and Pfizer’s vaccine success. These stocks can win big now as there’s more predictability in the environment.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The FTSE 100 index hasn’t had it so good for a while now. As I write, the index is hovering around 6,200, a level not seen since early August. Its increase of 5% since the last close hasn’t been seen since March.

No points for guessing the reason for the stock market rally though. The US’s election polls had global stock markets on tenterhooks for much of last week and the rally was initially driven by Biden’s win. Pfizer’s successful coronavirus vaccine has also added to huge investor relief.

What the ‘Biden bounce’ means for the FTSE 100

Both imply that the worst is over for stock markets. Uncertainty around the US’s political future was moving them sideways and Covid-19, of course, had sent businesses across the world in the doldrums. The US economy was expected to show healthy growth in 2021, but forecasters like Goldman Sachs said that a Biden win would improve growth prospects even more.

I think companies with a strong US market stand to gain. Recently, I wrote about how the Irish construction firm CRH could be a big gainer in time. There are at least two more stocks in this category. One is Ashtead, the FTSE 100 industrial equipment rental company. More than half its revenues come from the US.

Another is the FTSE 100 luxury brand, Burberry. It will get a double boost in demand from a Chinese bounceback and now the US. The US accounts for a smaller, but still substantial 23%, share in its revenues.

FTSE 250 stocks to consider

In a similar vein, I’d now consider buying the beleaguered fashion brand and retailer Ted Baker. After a reset following last year’s fiasco, the company has been struggling like many others in 2020. However, with 30% of its sales generated in North America, the tide may be about to turn for it.

I’m also hopeful about Cineworld, which has a strong US presence too. Its share price has already bounced back, with a very likely shot in the arm from the Pfizer news.  

FTSE 100 stocks I’d avoid now

FTSE 100 precious metals giant Polymetal International, on the other hand, has weaker prospects in my view than earlier. The reasoning is straightforward. Precious metal stocks have rallied this year on macro-economic and financial markets uncertainty. With some stability back, I reckon the gold price’s rise will slow down. This, in turn, will impact gold stocks. 

It doesn’t mean that all will be lost for them. POLY, for instance, showed strong revenue growth even before the gold price rally. But if the price of gold is the sole reason for buying the stock, I’d think it through first.

I’d think similarly about Fresnillo, another FTSE 100 precious metals miner. It may not have lost its lustre, but it is probably dimmed for now. If Pfizer’s vaccine news turns out less positive than is now suggested, there could be a bounce-back in gold stocks. Over time though, I reckon their growth will temper.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Manika Premsingh owns shares of Burberry and Polymetal International. The Motley Fool UK has recommended Burberry and Fresnillo. 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.

More on Investing Articles

Investing Articles

Here’s what dividend forecasts could do for the BP share price in the next three years

I can understand why the BP share price is low, as oil's increasingly seen as evil. But BP's a cash…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

This FTSE 100 Dividend Aristocrat is on sale now

Stephen Wright thinks Croda International’s impressive dividend record means it could be the best FTSE 100 stock to add to…

Read more »

Investing Articles

3 shares I’d buy for passive income if I was retiring early

Roland Head profiles three FTSE 350 dividend shares he’d like to buy for their passive income to support an early…

Read more »

Investing Articles

Here’s how many Aviva shares I’d need for £1,000 a year in passive income

Our writer has been buying shares of this FTSE 100 insurer, but how many would he need to aim for…

Read more »

Female Doctor In White Coat Having Meeting With Woman Patient In Office
Investing Articles

1 incredible growth stock I can’t find on the FTSE 100

The FTSE 100 offers us a lot of interesting investment opportunities, but there's not much in the way of traditional…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

With an £8K lump sum, I could create an annual second income worth £5,347

This Fool explains how a second income is achievable by using a lump sum, investing in stocks, and the magic…

Read more »

Investing Articles

Here’s what dividend forecasts could do for the BT share price in the next 3 years

With the BT share price down so low, the dividend looks very nice indeed. The company's debt is off-putting, though.…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

28% revenue growth per year and down over 20% in price! Should I invest in this niche FTSE 250 company?

Oliver says this FTSE 250 company has done an excellent job bringing auctioning into the modern world. Will he invest…

Read more »