April 13, 2024
Stock Market

A bull run is coming! I’ll invest £5k in 5 shares before the stock market rally

Young mixed-race woman jumping for joy in a park with confetti falling around her

Image source: Getty Images

I got a taste of what a stock market rally feels like in the final days of last week. My self-invested personal pension (SIPP) recouped its January losses and then some, and I’m hoping for more excitement in the weeks ahead.

I don’t know when the bull run will arrive. Lately, it’s been a case of three steps forward, two steps back for the FTSE 100. That’s how it is to be an investor.

Yet I think we’re due one after a tough few years and may get it when the Bank of England cuts interest rates. Markets hope it lands in May. I think June is more likely. Time will tell.

I’m feeling bullish today

I’m hoping this will light a rocket under shares, but again, we’ll see. Right now, I’m enjoying last week’s bounce, and wondering which stocks will spearhead the recovery.

The FTSE 100 is full of dirt cheap, high-yielding financials. Barclays, NatWest and Lloyds Banking Group could fly if the bull run takes off. I hold Lloyds, so I hope so.

While lower interest rates may squeeze banks’ net interest margins they should also lower loan impairments. Cheaper borrowing costs should also revive the property market and mortgage lending.

Wealth managers like M&G and Schroders typically do well when markets rise, as net assets under management and net inflows increase. I hold M&G and will admire its blockbuster 8.75% yield while I wait for the share price to climb higher.

As economic sentiment picks up, cyclical stocks like FTSE 100 miners should follow. They’ve taken a beating as the Chinese economy struggles.

Glencore shares are down 21.26% over 12 months, while Anglo American crashed 44.74%. Both showed signs of life last week, rising 3.77% and 5.85%, respectively. When the bull market finally arrives, I’d expect them to join the stampede. As ever, there are no guarantees.

Beaten-down retail stocks could get a new lease of life too. Luxury fashion firm Burberry Group is at the top of my shopping list after crashing. I wanted to buy it a week ago but didn’t have the cash. It’s up 5.85% since. Annoying.

I’m ready for the recovery

Pest control specialists Rentokil Initial (LSE: RTO) caught my eye last October, when its share price crashed 30% in a month after warning of a slowdown in its North American operations, which remains a risk. Its European and emerging markets operations were still doing the business. But that wasn’t enough for investors, who bailed.

The only thing that stopped me taking advantage of the dip to load up on Rentokil shares at the time was a shortage of readies and the fact that they were still a little pricey, trading at almost 20 times earnings.

That’s roughly its valuation today, while the yield is relatively low at 1.78%. The outlook is brightening as the US economy holds up, and the stock jumped 7.89% last week. It’s still down 16.12% over one year so there’s an opportunity here.

If I had £5k to invest today I’d play the stock market recovery by purchasing Barclays and topping up my small stake in Phoenix. Then I’d buy Burberry, Rentokil and one more stock with comeback potential. There are an awful lot to choose from. Then bring on that rally.

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