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Stock market rally: I reckon these are the best shares to buy now for 2021

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I think the best shares to buy right now are those that should bounce back fastest once Covid-19 vaccines do their work and the nation is lifted out of lockdown. When that happens, the UK stock market could embark on the next leg of the recovery.

Nobody can say for sure when we will return to our old lives. The Government certainly doesn’t know. However, we can’t stay under lock and key forever. At some point we must be set free to shop, eat out, travel and do all those wonderful things we once took for granted. When that happy day arrives, I think the best shares to own will be companies that have shown resilience in hard hit sectors.

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I think the FTSE 100 banking giants such as Barclays, Lloyds Banking Group and NatWest Group could lead the charge this year. The collapse in interest rates has squeezed net lending margins, and the general slowdown in consumer and business activity.

These could be the best shares of all

They are now trading at incredibly cheap valuations, with Barclays and Lloyds available at just over 10 times earnings, and NatWest Group at just 6.4 times. While they do not pay dividends at the moment, they have been given the green light to restore them, so at some point, the income should start flowing. When it does, these could number among the best shares around.

I also favour FTSE 100 mining stocks. The pandemic may have started in China, but Asia has emerged from 2020 in surprisingly good shape. This is positive for commodity stocks such as Anglo American, BHP Group and Rio Tinto. They should now see an uptick in demand for the metals and minerals they produce.

Companies in the mining sector are more expensive than the banks. Anglo American trades at 13.9 times earnings, BHP Group at 16.7 times, and Rio Tinto at 13.4. However, in contrast to the banks, they currently pay dividends, yielding 2.85%, 4.02% and 4.47% respectively. The sector contains some of the best shares for investors seeking long-term income and growth. They should power on once the global economy kicks back into gear.

Decide your personal risk level

If you are willing to take on more risk, you could look at the travel and leisure sector. Travel bans have grounded airlines such as International Consolidated Airlines Group and easyJet , and the misery has extended into 2021. InterContinental Hotels Group is also suffering.

These could be three of the very best shares to own when we start moving again. However, I’m not brave enough to buy them myself. Their share prices could fly to the moon if vaccines live up to their billing, but the balance sheet damage will take a long time to repair. Other investors may be made of sterner stuff!

I think the UK will offer some of the world’s best share buying opportunities in 2021, as Brexit uncertainty clears, and we take a lead in administering vaccines. 

These shares could reap the benefit, too.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, InterContinental Hotels Group, and Lloyds Banking Group. 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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