The recent stock market rally has lifted the prices of a wide range of UK shares. However, there could still be a long way to go in this bull market. After all, the FTSE 100 and FTSE 250 continue to trade well down on their all-time highs. They’ve previously fully recovered from even their very worst bear markets.
As a result, now could be the right time to buy a diverse range of stocks for the long run. In time, they could deliver impressive returns that improve an investor’s financial outlook.
Recovery potential in a stock market rally
UK shares such as IAG and HSBC could be major beneficiaries from a likely long-term stock market rally. Both companies are facing exceptionally challenging operating conditions caused by coronavirus. However, they appear to be putting in place sound strategies to deliver long-term growth.
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For example, IAG has reduced costs and strengthened its financial position. This may mean it can survive short-term challenges to benefit from a gradual return to pre-coronavirus air traffic levels.
Similarly, HSBC is shifting resources away from operations that are relatively sensitive to interest rate changes. It’s also cutting costs to improve its efficiency. As such, it could generate rising profitability after a tough economic period.
Dominant market positions among UK shares
Other UK shares such as Rightmove and Auto Trader have dominant market positions that could lead to impressive returns in a stock market rally. For example, Rightmove is the leading online property listings website. It’s also investing in innovative products and services that could strengthen its position.
Similarly, Auto Trader has a commanding presence in the online automotive market. And it could be catalysed by a likely improvement in consumer sentiment as the UK economy gradually delivers improving GDP growth after this year’s recession. With consumers increasingly becoming more comfortable shopping for a range of products online, Autotrader may continue to benefit from a digital evolution within the economy.
Dividend opportunities in the FTSE 100
With interest rates set to remain low for a prolonged period of time, UK shares with generous dividends such as Polymetal, BHP and Vodafone could lead the way in a stock market recovery. All three companies currently have yields currently in excess of 5%, which may make them appealing to investors who are seeking to make a passive income. They may also have the capacity to grow as their earnings may improve over the medium term.
With Vodafone appearing to have a sound strategy that’s prompting improving customer satisfaction levels, it may be able to strengthen its market position. Meanwhile, BHP’s diversity and Polymetal’s increasing efficiency could mean that they offer relatively impressive returns. Certainly as a stock market recovery takes hold in the coming years.
