Stock market

2 FTSE 100 shares investors should consider buying ahead of interest rate cuts

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There are two FTSE 100 Shares that I think investors should consider buying ahead of a potential interest rate cut. They are Persimmon Homes (LSE: PSN) and Unilever (LSE: ULVR).

Here’s why!

Is a rate cut pending?

High interest rates have put pressure on many businesses in terms of finances, performance and investor sentiment.

For some stocks, lower rates could spell greener pastures for trading, consumer spending, and even general investor sentiment.

Let me be clear, there is no guarantee that rates will come down anytime soon. However, many economists believe we may be closer to the Bank of England (BoE) finally deciding.

How can Persimmon and Unilever benefit? Furthermore, are they a good investment? I think!

Implications of a rate cut

The entire property sector, including house builders, commercial and residential sectors, has been devastated by inflation along with inflation.

If prices and costs come down, Persimmon could potentially build more houses with bigger margins. In addition, with mortgage rates potentially driving interest rates downward, more home sales may be on the horizon. This can be good news for the firm’s coffers, and hopefully increase shareholder value.

From Unilever’s perspective, weak consumer spending, particularly for more premium brands, has hurt the firm and its share price. In fact, the business is currently trading at levels not seen in a while. A rate cut could again boost consumer spending, some on the luxury brands we all love to enjoy. In turn, this could send shares higher, and boost efficiency and profitability.

An investment case

Persimmon is one of the UK’s biggest housebuilders, and could capitalize on the housing imbalance in the UK in the long term. Simply put, demand outstrips supply.

Looking at some fundamentals, the shares look reasonable value for money at a price-to-earnings ratio of just 15. Also, a dividend yield of 4.7% currently looks well covered with a decent balance sheet. However, I am aware that profits are never guaranteed.

Naturally, there are risks to contend with. Interest rates may be lower, but rising material prices due to inflation may not follow suit. Higher building costs, without being able to raise prices, can result in tighter margins. This can affect investor sentiment and profitability.

I am happy with Unilever’s brand power as well as its wide reach. The firm’s long track record is also hard to ignore. This current dark economic cloud is not its first rodeo, and it knows how to come out the other side in good shape. Also, the recent strategic decision to divest underperforming brands and invest in better ones, can take the business to new heights.

From a fundamental perspective, the shares also look reasonable value for money at a price-to-earnings ratio of 16. Also, its dividend yield of 3.7% is attractive.

Finally, from a bearish perspective, I’m a little concerned about changing shopping habits. This is mainly due to the supermarket disrupting market share eating and duplicating popular products, as well as the rise of discount retailers, such as fellow FTSE 100 incumbents. B&M. I will keep an eye out for performance updates to see if there is any performance impact.


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