The FTSE 100 achieved its strongest run in over two years this week, posting its seventh consecutive day of positive factors on Tuesday. This momentum recovered losses from earlier within the month, bringing the index up 1% year-to-date (YTD). 

The transfer suggests renewed investor confidence after an extended interval of cautious sentiment.

What’s driving the rally?

A key issue behind the FTSE’s restoration has been the easing of worldwide commerce tensions. Markets have been rattled earlier this month by the announcement of US commerce tariffs on the UK — however latest statements from Washington counsel a softer stance. Nothing is about in stone, after all. However as fears subside for now, investor urge for food for danger has elevated, benefitting large-cap UK shares with worldwide publicity.

Moreover, the Footsie’s heavy weighting in commodities, banking and defensive sectors has made it an interesting choice amid persistent international financial uncertainty. A weaker pound has additionally helped UK multinationals by making their abroad earnings extra precious when transformed again into sterling.

Sectors which might be main the cost embrace client staples, utilities and housing. The highest two, which buyers might need to take into account, embrace Severn Trent (LSE: SVT) and J Sainsbury (LSE: SBRY).

Severn Trent

One of many standout performers over the previous week is Severn Trent, which has climbed 9.25%. The utility agency, which provides water and waste companies throughout the Midlands and Wales, gives a horny 4.3% dividend yield. This may present a defensive cushion throughout unsure financial intervals.

Sadly, the price surge pushed up its price-to-earnings (P/E) ratio to 23, so the price could also be barely overvalued now. Plus, it carries notable debt ranges – over £6.8bn – elevating issues in the next rate of interest setting. Regulatory scrutiny and environmental challenges are additionally ongoing dangers for water utilities.

On the plus aspect, its regulated mannequin supplies secure money flows and helps dependable dividend payouts. Its most up-to-date earnings report confirmed underlying revenue earlier than tax rising to £25m, underpinned by constant buyer demand.

J Sainsbury

Grocery store large J Sainsbury has seen its share price soar 8% within the final seven days, buoyed by stable gross sales progress and improved margins.

In its latest full-year outcomes, the retailer reported a 7.6% improve in underlying revenue to £70m, and maintained its dividend payout, yielding round 5%. It has additionally gained market share as buyers reply positively to price cuts and loyalty incentives by way of its Nectar programme.

But it operates in a fiercely aggressive grocery sector, going through stress from Aldi and Lidl at one finish and Tesco on the different. Revenue margins stay tight, and price pressures similar to wage will increase, pension liabilities and provide chain challenges might squeeze earnings. 

On the plus aspect, it has a low P/E ratio of 10.8, suggesting the price has enough room to develop.

Trying forward

With momentum on its aspect, the FTSE 100 might now push in direction of new document highs. That’s, if inflation continues to ease and the Financial institution of England’s (BoE) extremely anticipated rate of interest cuts materialise. 

Nevertheless, a lot will depend upon financial knowledge and central financial institution coverage choices on each side of the Atlantic. Whereas technical indicators stay bullish within the brief time period, buyers ought to stay cautious of potential volatility.