The FTSE 100 nears 8,000 points! I don’t think these UK shares will stay cheap for long

The FTSE 100 has loved a stellar week and is up a number of hundred factors. At 7,950 factors, it’s closing in on the psychologically key 8,000 barrier.

Given the drivers behind this transfer, I feel {that a} extra sustained market rally might be seen in coming months. This offers me a kick within the bottom to purchase some low-cost UK shares earlier than time runs out.

Why the market is rising

One of many fundamental components that helped the market this week was key central financial institution conferences. On Wednesday (20 March), the US Federal Reserve strongly hinted that rate of interest cuts are coming this 12 months.

This pushed the US inventory market greater. This acted to assist totally different inventory markets world wide bounce too, together with right here within the UK.

Following this, the Financial institution of England met and struck an identical tone. Nobody from the committee voted for a price hike, with feedback from the governor suggesting that price cuts within the late summer season are due.

That is optimistic for shares normally, additional serving to to push the FTSE 100 and FTSE 250 up. The lead index did briefly commerce above 8,000 in February final 12 months. It seems that we might be due one other go to above 8,000 factors quickly.

The place to focus on

Now’s the time for me to consider the primary shares that ought to profit from decrease rates of interest. In spite of everything, if we do see price cuts in coming months, these are the shares prone to outperform.

A very good place for me to delve into is development shares with greater debt ranges than extra mature corporations. Debt is commonly taken on to assist gas additional development and enlargement. But excessive rates of interest makes it dearer to service present debt and tackle recent loans. Subsequently, if charges get minimize, this eases strain right here. It ought to assist to decrease prices for the agency and increase money move.

One agency on my thoughts

An instance of a inventory I’d think about is Ocado Group (LSE:OCDO). The inventory is likely to be up 11% over the previous 12 months, but it surely’s down a whopping 76% over the previous three years.

I’ve had a really combined relationship with the inventory prior to now, however really feel it does tick the packing containers for what I’m on the lookout for proper now. One of many struggles it has endured prior to now is the burden of debt. That is nonetheless elevated, with a debt-to-equity ratio of 1.32 (above the extent of 1 that’s seen as comfy). But I don’t really feel the enterprise is drowning in debt for this to be a cloth threat. In consequence, decrease rates of interest might assist the agency right here.

As for development, Ocado might do very nicely if rates of interest get minimize on account of greater client demand. Keep in mind that charges can be decreased as a result of inflation is continuous to fall.

Excessive inflation within the grocery area was one level that was flagged up by Ocado as placing important strain on earnings final 12 months. The reversal of this could have the other influence.

Given the long-term low cost the Ocado share value trades at, I feel it’s an affordable choice and I’m contemplating placing in a small sum of money.