UK share markets have got off to a flyer in December after a flatter few weeks. Both the FTSE 100 and FTSE 250 are a whisker off reaching new multi-month highs as news emerged that the Moderna and Pfizer/BioNTech Covid-19 vaccines could be rolled out in the US and Europe this month.
The stock market rally that set off in early November ran out of steam quite quickly. But many analysts remain convinced we’re seeing the first phases of a new bull market for UK shares.
According to Peter Fitzgerald, chief investment officer at Aviva Investors: “As you lift restrictions, the world will revert back to something more similar to what we had pre-coronavirus rather than some sort of ‘new normal’ everybody likes to talk about… We do think you are at the early stages of a new cycle.”
UK shares to enjoy a Brexit boost?
Despite the November UK share price rally though, the FTSE 100 et al has still underperformed other major international bourses recently.
The Footsie remains a good 15% lower than it was at the start of 2020. Conversely, the Dow Jones in the US just hit new record highs. And the Nikkei in Japan is a whisker off 29-year highs struck in late November. Meanwhile, the German DAX and French CAC40 bourses just hit their highest levels since late February.
However, Fitzgerald suggests UK share indices could outperform their European counterparts in the near future. He reckons investors will return to British equities en masse once a Brexit trade deal is announced.
One of the best!
It’s no shock airline operators like IAG have posted some of the biggest gains in recent sessions. Hopes that a Covid-19 vaccine will open the world up for holidays and business travel again bodes well for this FTSE 100 business and its peers.
The flyer isn’t out of the woods just yet as coronavirus cases keep rising and vaccines still await regulatory approval. But this UK share is better placed that many to weather any fresh turbulence. As Hargreaves Lansdown notes: “the recent cash raise puts IAG in a stronger position than some of its peers, and this is its main attraction in our view.”
I think a low forward price-to-earnings (P/E) ratio of 1.4 times makes it a very attractive value buy for the new bull market. But I wouldn’t just buy this UK share for its likely share price recovery in the next couple of years. I’d hold onto IAG as its transatlantic operations and exposure to the European budget market should deliver big profits further out.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.