Have you started thinking about which UK shares you’d like to buy in 2021? I’ve built a watchlist of FTSE 100 shares I’m considering buying for the new year. Even signs of a spluttering global economic recovery won’t stop me from building my Stocks and Shares ISA.
Firstly, there are plenty of defensive FTSE 100 shares out there that should deliver big shareholder returns even if conditions remain tough. Utilities providers like National Grid, telecoms ace Vodafone or defence contractor BAE Systems, for example.
Secondly, I invest with a view to making big long-term returns rather than making a quick buck. I’ll buy UK shares in 2021 that have the balance sheet strength to survive a prolonged period of pain for the global economy.
Staying positive
The FTSE 100 is packed with top stocks like these. And they have the capacity to deliver gigantic shareholder returns during the inevitable bull market. It might not happen in 2021, but the global economy will rebound from the Covid-19 crisis. Profits from UK plc will recover strongly, as they always do following severe economic crises. And a subsequent recovery in investor confidence will push UK share prices through the roof.
This is how hundreds (some argue thousands) of Stocks and Shares ISA investors became millionaires in 2010s. They bought robust UK shares in the immediate aftermath of the 2008/09 financial crisis. And they raked in the cash as the value of their investments recovered strongly.
The FTSE 100, for instance, more than doubled in value in the years following the banking crisis. The blue-chip index hit a trough of around 3,800 points in February 2009. But by summer 2018 it had swept to record peak of around 7,800 points. Those who bought into Footsie-quoted stocks during the period made a killing.
3 reasons UK share prices should soar
I can’t see why UK shares won’t soar following the coronavirus crisis either. In fact, there are several major reasons why I reckon the recovery could mirror that which we saw during the last decade.
- Central banks and governments all over the globe remain committed to printing money to aid the economic recovery. Critically, the US Congress just signed off on a $900bn Covid-19 relief package to companies and citizens. The Federal Reserve also remains conducive to further rounds of quantitative easing in 2021. It’s likely that ultra-low interest rates will be here to stay well into the new decade too.
- The mass cutting and cancellation of dividends this year has helped to build bulky balance sheets. This cash can be reinvested once the pandemic passes to boost earnings growth and give UK share prices an extra lift.
- Many UK shares also continue to trade at rock-bottom valuations following the 2020 stock market crash. This provides extra scope for a stunning bull market in the years ahead.
