The UK budget will be released tomorrow. Chancellor of the Exchequer Rishi Sunak’s second budget is widely expected to support the struggling UK economy.
But I think some sectors of the economy could benefit more than others. FTSE 100 stocks from these sectors will be positively impacted, in my view.
Stamp duty waiver to benefit FTSE 100 property stocks
I am looking out for what happens next with the stamp duty waiver. It has been a huge success, as is evident in record house price numbers.
According to news reports, the waiver will continue until the end of June. It was earlier supposed to end on 31 March. An extension could give a fillip to real estate companies. FTSE 100 companies like Taylor Wimpey, Persimmon, Barratt Developments, and Berkeley Group Holdings would benefit from this.
Real estate stocks were already some of the biggest gainers in yesterday’s trading session, suggesting that this news may already be baked into their prices. They may not rally tomorrow, but the policy itself could strengthen their finances by increasing demand. This could be good for their share prices over time, too.
UK budget to give a push to green energy
A green bond is also expected from the UK budget tomorrow, which will allow fund-raising for renewable energy and clean transport options. I think this can be a positive for FTSE 100 companies already associated with the green industry.
One of them is Johnson Matthey, which among other things, produces chemicals used in electric vehicle (EV) cells. Another one is the FTSE 100 multi-commodity miner Rio Tinto, which is now looking to produce lithium. I have written about both in this context in greater detail here.
Anglo American (AAL), another FTSE 100 miner is also likely to benefit from the UK budget because of this. Platinum group metals are an important segment for AAL, and are used in hydrogen-powered EV cells.
Consumer spending likely to sustain
More generally, the UK budget will support the economy to ensure that it does not slump post- lockdown easing at the end of June. This could mean continuation of the furlough scheme and increased universal credit allowance.
I think this could hold up consumer demand. Positive impacts on FTSE 100 stocks like Diageo, JD Sports Fashion, and NEXT may be felt accordingly. NEXT could benefit most among these, with almost 90% of its business sourced from the UK.
As an end note, I think it is important to underline that the UK budget cannot be the only reason to buy any particular stocks. I think these are worthy stocks in themselves, and they have proven their merit over time. But they also have risks associated with stock investing. Unknown outcomes for the economy post-lockdown is a big one among them. But the UK budget can give them a nudge in the direction of further growth. It is a good time to decide whether or not to buy these shares. I think it could be.
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Manika Premsingh owns shares of JD Sports Fashion. The Motley Fool UK owns shares of Next. The Motley Fool UK has recommended Diageo. 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.