Here is my prediction for the most effective FTSE 100 shares for H2

We’re within the second half of the yr, with a lot on the horizon that would make for volatility within the inventory market. It kicks off tomorrow (4 July) with the UK basic election. In coming months, we’re due a number of main central financial institution conferences, inflation and different information releases that would influence FTSE 100 shares. With that in thoughts, right here’s how I feel issues may pan out.

Occasions forward

If we begin with the final election, I really don’t suppose we see an enormous market response if the Labour celebration win a majority. It is because this eventuality is broadly anticipated by folks. Traders don’t like unpredictability, but when issues occur as anticipated, there’s not an excessive amount of to be involved about within the quick time period.

Trying forward, I feel that the primary driver for the FTSE 100 might be inflation and the response of rates of interest. The most recent information confirmed that inflation is now again at 2%, the goal stage of the Financial institution of England. This could doubtless help a number of cuts in rates of interest between now and the tip of the yr.

If my prediction is right, I feel that the most effective Footsie shares for me to consider shopping for might be ones that stand to profit from decrease inflation and decrease rates of interest. On the identical time, I may look so as to add shares that would do nicely from elevated Authorities spending in key areas equivalent to property and healthcare.

Subsequent up

One instance of a inventory on my watchlist for H2 is Subsequent (LSE:NXT). The style and homeware retailer has been a face on the excessive road for over 4 many years. Over the previous yr, the inventory has outperformed, rallying by 32%.

I feel the inventory may proceed to do nicely as inflation continues to average. Customers ought to really feel extra assured with their funds with out prices spiralling larger. This might see them spend extra on clothes and residential furnishings. I feel Subsequent is nicely positioned to profit from this, in that it isn’t high-end luxurious however extra center market.

Additional, Subsequent ought to profit from decrease debt prices. Within the annual report, it talked about how web debt diminished by £97m to £700m for 2023. That is nice, however one other profit might be felt via decrease financing prices going ahead. If rates of interest do fall, it’ll make issuing new debt inexpensive. This in the end ought to assist to spice up money movement and profitability.

One threat is the issue that Subsequent has with exterior elements. For instance, within the newest quarterly report, it spoke of how demand is likely to be decrease on account of moist spring climate. To be on the mercy of the pure parts isn’t one thing buyers might be glad about!

Making a name

Finally, my predictions for the approaching six months are primarily based on how I see the world proper now. Folks would possibly (and do) disagree with me. But that’s the fantastic thing about the inventory market. It’s made up of patrons and sellers, with those who make the right calls rewarded in the long term.