If you knew for certain global economic recovery is on the way, which shares would you buy now?
Maybe you should go out and buy them because one powerful indicator signals recovery ahead. Indeed, copper prices have been shooting the lights out. And some argue that copper is good at predicting where the economy is heading.
Global economic recovery to drive shares higher
Businesses in several sectors use copper, such as in housebuilding, consumer products, and industrial applications, among others. Demand for the metal could be driving the price higher. It’s risen around 30% over the past three months and is also up on its level at the beginning of the year – a period that includes the coronavirus dip. If copper truly is a reliable lead indicator, I’d expect shares to rise soon too.
For example, bank shares are known to be early movers in and out of recessions. So we may see stocks such as Lloyds Banking Group and Standard Chartered gathering upwards momentum. Those stocks have dropped a long way since the coronavirus crisis hit the world economy. And economic recovery could boost shares in the housebuilding sector, such as Persimmon and Taylor Wimpey.
But copper isn’t the only commodity that’s been buoyant lately. So we could invest directly in mining companies that will see their profits rise when commodity prices go up. There are many to choose from, such as BHP, Antofagasta, Kaz Minerals, and others.
However, there’s decent-looking value in many sectors right now. And a portfolio of shares diversified across sectors and companies could do well in the years ahead… if a global recovery arrives as copper suggests it may.
Diversification across sectors
In the agriculture sector, for example, I like the look of Wynstay and Ros Agro right now. And groundworks and geotechnical solutions specialist Keller looks well-placed to benefit from global economic recovery. Meanwhile, Tate & Lyle provides ingredients and solutions to the food, beverage and other industries. And City analysts have pencilled in a double-digit recovery in earnings next year. I think the stock looks like good value.
I’m keen on the fast-moving-consumer-goods sector because it’s known for its defensive and cash-generating characteristics. You could go for big operators such as Unilever, Reckitt Benckiser or British American Tobacco. But I think there’s a recovery in operations brewing for the FTSE 250’s PZ Cussons. There’s a new chief executive at the helm and a global economic recovery could help the business and the stock to thrive from where we are now.
If you’re investing for the long haul, perhaps to help fund your eventual retirement, some or all the stocks mentioned could be worth considering. You could even mix a few shares with managed or tracker funds.
If copper is a reliable forward indicator we could see global economic recovery ahead. To me, that means it’s a great time to get stuck into investing in shares right now.
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Kevin Godbold owns shares in PZ Cussons. The Motley Fool UK owns shares of and has recommended PZ Cussons and Unilever. The Motley Fool UK has recommended Lloyds Banking Group and Standard Chartered. 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.