Investors received significant vaccine news in November. Announcements from pharmaceutical giants Pfizer, Moderna, and Astrazeneca provided positive updates in the fight against Covid-19.
Global stock markets responded with strength. The FTSE 100 and Dow Jones indexes climbed by 12% in November. The strong performance came with a rapid sector rotation, from lockdown stocks to economic recovery stocks.
Economic recovery stocks, particularly those in oils, aerospace, and the banking sector were among the worst-performing shares until the end of October. Worldwide lockdowns and economic weakness prevented many of them from rising. However, vaccine news in November provided a catalyst for these beaten-down UK shares to outperform.
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While technology stocks provided the leadership for much of the year, UK shares in re-opening sectors thrived in November.
Will re-opening stocks continue to thrive?
Was November’s bounce in re-opening stocks a one-off occurrence or will they continue to outperform over the coming months?
I think there is much more room for re-opening stocks to outperform over the coming months. This week, the UK became the first country in the world to approve the Pfizer vaccine for public use. With vaccination rollout starting soon, many UK shares look well-placed to benefit from a return to post-lockdown life in my opinion.
In addition, UK shares could receive a welcome boost when Brexit negotiations are completed with the European Union. The deadline is fast approaching, and any clarity could remove uncertainty.
3 UK shares for an economic bounce-back
I reckon many people that missed out on a holiday this year are looking forward to booking a trip in 2021. Jet2 is a popular package holiday provider that could benefit from pent-up demand for holidays. Jet2 was performing well before the pandemic. It had growing earnings, a strong balance sheet, and positive share price momentum — three metrics I like to see.
I think Jet2’s fortunes will return once holiday bookings return to pre-pandemic levels, and I would consider buying more shares in my Stocks and Shares ISA.
Banking sector shares tend to be one of the first to bounce back in an economic recovery that immediately follows a crisis. This could be due to the cyclical nature of the banking industry. Investors experienced this in the global financial crisis in 2009. UK banks experienced a 60% increase in stock prices in just one month following the 2009 stock market trough.
I would consider Barclays as my top pick in the UK banking sector. It looks cheap versus peers and offers a good opportunity to invest before an economic recovery takes hold. It was encouraging to see that it delivered a resilient performance in its most recent update.
The UK high street is experiencing significant change and UK retail in 2021 could look different from previous years. This week both Arcadia Group and Debenhams collapsed, potentially leaving a large hole in the UK high street. Retailers that can survive the crisis could thrive over the coming years as competition is reduced.
One such well-known retailer is Marks and Spencer. The M&S share price has fallen from over 570p in 2015 to below 100p in 2020. I reckon it’s finally reached the bottom and it represents great value and excellent upside.
