The FTSE 100 soars to 19-month peaks! 3 cheap Footsie shares I’d buy today

You wouldn’t think it if you looked at the recent performance of the FTSE 100. But the outlook for the global economy is darkening amid supply chain pressures, soaring inflation, and rising Covid-19 cases in parts of the world.

The FTSE 100 has kept strengthening despite these problems. Britain’s blue chip share index has risen 5% in the past month, taking total 12-month gains to an impressive 22%. And yesterday the Footsie rose to its highest since February 2020, above 7,240 points.

Big risers

When you drill down into it, however, the FTSE 100’s recent rise isn’t that surprising. Higher energy prices on supply-side fears have gone a long way to boosting the index. Oil majors BP and Royal Dutch Shell, shares which make up a large chunk of the Footsie’s total weighting, have soared in price as crude values have leapt. The Brent benchmark in London struck multi-year highs north of $85.10 a barrel on Friday.

The share prices of Britain’s major banks have also risen strongly of late. Soaring inflation in the UK has led to speculation about Bank of England rate hikes coming sooner and more severely than previously expected. This would provide a significant boost to the profits of FTSE 100 players Lloyds, Barclays, Natwest and their peers.

Why I’d buy other UK shares

It’s possible that these specific FTSE 100 shares could continue rising in the near term, too, pulling the broader index even higher. But as someone who invests on a long-term view I’m not interested in buying these rocketing shares myself.

The threat of historically low interest rates, rising competition, and weak economic growth in Britain is discouraging me from buying UK-focussed banking shares like Lloyds. The growing use of renewable energy — and the prospect of a tricky transition from oil to greener sources by BP and Shell — makes the oil majors too risky for my liking, meanwhile.

3 dirt-cheap FTSE 100 shares on my radar

There are many other cheap FTSE 100 shares I’d rather buy today. For example I think Aviva shares look mighty attractive at current prices (it carries a 5.5% dividend yield and trades on a forward P/E ratio of just 9 times today).

Demand for its insurance products could dip if the economic recovery crashes. But I think the prospect of increasingly large dividends make the company too good to miss. Besides, I think its colossal brand power should deliver solid long-term earnings growth.

I believe the Royal Mail share price offers brilliant all-round value at recent levels. The courier trades on a forward P/E ratio of 7 times and boasts an inflation-beating 5% yield. I think it should see off the threat of rising competition and post significant long-term profits growth as the rise of online shopping turbocharges parcel volumes.

Finally, ITV’s low P/E ratio of 8 times has also caught my eye today. Despite the threat of streaming giants like Netflix, I expect the broadcaster’s profits to soar thanks to heavy ongoing investment in video-on-demand and programme production.