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Here’s why I’m buying into the FTSE 100 recovery

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On Tuesday, the FTSE 100 hit its highest level since early March, briefly topping 6,130 points. The FTSE 100 recovery, it seems, might well be under way. We’re still looking at a fall of around 20% since the beginning of 2020, mind. But the UK’s top index has rebounded 25% since its lowest point of the year.

I know it’s early days, but it does show that selling when a panic is in full flight is not a winning strategy. You can’t time the bottom, of course, but if you’d got in generally around the time of maximum panic you’d be doing well today. The big question, though, is whether these seeds of recovery are sustainable.

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The latest uplift comes the day after Prime Minister Boris Johnson announced the newest easing of our Covid-19 lockdown restrictions. By 15 June, an increasing number of non-essential shops will be allowed to reopen (assuming progress on reducing coronavirus cases doesn’t start to come undone before then).

The reopening of shops was always going to mark a key milestone in the FTSE 100 recovery. And it’s happened sooner than many of us had hoped. So what’s happening to retail share prices?

Shops reopening

By Tuesday afternoon, the Associated British Foods share price was up 9%, presumably on hopes for the eventual reopening of its Primark clothing chain. Though Associated’s food businesses have been performing solidly, Primark has been the jewel in the crown.

But while some retail shares might be coming back, the FTSE 100 recovery is being led by other consumer-focused companies. The travel business is storming ahead, with International Consolidated Airlines shares up 19% and easyJet up 18%. Are those the best shares to buy now?

Well, they have actually been two of the biggest fallers during the FTSE 100 crash. Even with this uptick, easyJet shares are still down 62%. And International Consolidated shares are down 66%. So I think their early FTSE 100 recovery performances should be treated with a little caution.

A better travel option?

I’ve always steered clear of airline shares myself, and Warren Buffett has recently joined me by selling off his airline stocks. It might be a tempting sector for a short-term recovery profit, but I’m not even thinking of that as a strategy. No, I’m sticking with my search for long-term gems, Covid-19 or not.

With that in mind, it’s nice to see Rolls-Royce shares coming back strongly on Tuesday too. The share price is up 13% on the day as I write, but it is still 50% down so far in 2020. If you’re thinking of investing in the aerospace business in some way, I see Rolls-Royce as a promising option. No matter which companies at the sharp end win or lose, a lot of them will be doing it with Rolls-Royce engines.

The real FTSE 100 recovery

These current winners might look attractive, but they’re not behind my confidence in a FTSE 100 recovery. No, the main reason I’m currently choosing what FTSE 100 shares to buy is different. It’s because I’ve always had confidence in the long-term prospects for FTSE 100 shares. Being able to buy at cheaper prices because of the coronavirus crash is just a bonus.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. 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.

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