This month’s stock market rebound will have taken many by surprise, especially those who ran for cover during last month’s crash. It shouldn’t have. The bear market was so sudden and severe, investors were bound to take a calmer view at some point.
The stock market recovery has driven the FTSE 100 up 25% to just over 5,800, at time of writing, a level last seen in February 2016. There’s scope for markets to climb even higher, as stocks remain well below their January lows. If I had £5k to invest, I’d go hunting for bargain FTSE 100 shares today.
Further volatility is inevitable, given the unprecedented nature of the Covid-19 crisis. Markets could crash, markets could rebound. In the short term, nobody knows. What we do know is that, in the longer run, shares beat almost every other asset class.
The stock market rebound will come
If you pop shares inside a Stocks and Shares ISA after a stock market crash, you’re getting them at a discounted price, and will benefit if you hold them for the long term.
The stock market rebound will come, if you give it time. If you buy a selection of FTSE 100 stocks today, you’ll be ready when it does.
Household goods giant Unilever and spirits specialist Diageo are right at the top of my buying list. They sell items people will want to buy during the lockdown, and will continue to buy after we all emerge blinking into daylight.
British American Tobacco and another cigarette company, Imperial Brands Group, are trading at bargain levels, even though their products continue to sell, and they continue to lavish investors with dividends, unlike many in the FTSE 100.
These shares can withstand the crash
Utility companies National Grid, United Utilities and SSE remain solid dividend payers, yet are going cheap as their share prices have dipped in the sell off. All three should prove rewarding, whenever the stock market rebound comes.
Mining giants BHP Group and Rio Tinto are also standing by their dividends, as are pharmaceutical companies GlaxoSmithKline and AstraZeneca.
These are the companies I would divide my £5k between today. Most are available at a relative bargain price, yet are far less affected by Covid-19 than airlines, cruise specialists, hotel chains, and hospitality companies.
Most are also sticking by their dividends, for now. This suggests they have strong balance sheets, steady cash flows and loyal customers, which are exactly the type of companies I like to invest in.
When the stock market rebound comes, you’ll be glad you bought when these top FTSE 100 companies were on sale. If the market crashes further, you can simply buy more at the new lower price.
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. The Motley Fool UK has recommended Diageo and Imperial Brands. 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.