Worried about another stock market crash? 2 safe-haven stocks I think could protect you

With the global economy threatening to fall off a cliff, Royston Wild talks up two safe havens that he thinks could help protect your wealth.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Grabbing exposure to precious metals would seem to be a grand idea as the threat of another stock market crash is ever present. Gold in particular is the one sentimental metal that tends to grab the headlines, and this proved the case again in the last week. The yellow metal surged back above $1,730 per ounce in end-of-week trading and it’s a hair’s breadth away from printing new seven-year peaks.

Fears over the legitimacy of fiat currencies have been a major driver of precious metals more recently. It’s a symptom of frantic money-printing by global central banks. But this hasn’t been the catalyst for gold in recent hours. Instead, rising acrimony between the US and China and worries over a bitter trade war have sent market-makers piling back into safe-haven assets. President Trump’s threat that “we could cut off the whole relationship” illustrates how frosty things have become.

Experts continue to speculate on the extent of the damage caused by the Covid-19 outbreak. But it’s clear that the effects are going to be pretty bad. In the current economic and political landscape, it pays to remain well invested in flight-to-safety commodities. And I for one would like to get exposure to timeless assets like gold by buying shares in Caledonia Mining Corporation (LSE: CMCL). At current prices the mining giant trades on a P/E ratio of below 9 times for 2020. It carries a tasty 2.5% dividend yield too.

Businessman looking at a red arrow crashing through the floor

Another great safe haven

Buying into defence stocks would also be a good idea right about now. The resilient nature of defence spending means that such shares will likely prove more resilient than most during the upcoming global downturn.

One great UK-listed defence play to buy today is Ultra Electronics (LSE: ULE). It advised in a trading statement last week that “trading remains broadly in line with expectations and despite the challenging environment, we continue to expect 2020 to be a year of good progress.” The world isn’t getting any safer and so its cutting-edge Tier 2 and Tier 3 technologies should remain strong, regardless of what economic pressures materialise.

In particular, Ultra Electronics’ strong relationship with the US Department of Defense (DoD) should underpin demand and safeguard sales. More than 60% of group revenues are generated in North America, with the DoD alone accounting for a quarter. US arms spending continued to balloon in 2019, according to the Stockholm Peace Institute. Spending is likely to keep growing amid what the organisation terms “a perceived return to competition between the great powers.”

City analysts certainly expect annual earnings at Ultra Electronics to keep rising over the medium term at least. This leaves the FTSE 250 safe haven trading on an undemanding forward P/E ratio of 15 times. A chunky 3% dividend yield for 2020 sweetens the investment case too.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Using the price-to-earnings metric to find the cheapest UK shares to buy now!

There’s certainly no shortage of value UK shares right now. I'm finding the cheapest stocks for my portfolio using the…

Read more »

Man changing battery on electric bicycle
Investing Articles

Stock market recovery: my top 2 FTSE 100 shares to buy this month!

The UK index might be trading above 7,500, but many FTSE 100 shares still haven't recovered. In fact, plenty trade…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

4 of my best shares to buy for an autumn stock market bounce

Jon Smith explains which are his best shares to buy depending on different scenarios behind a potential market rally.

Read more »

Risk reward ratio / risk management concept
Investing Articles

Is the GSK share price good value after the 13% fall last week?

Jon Smith considers the reason behind the sharp fall in the GSK share price last week, and wonders if now…

Read more »

Young black woman in a wheelchair working online from home
Investing Articles

At under 5p, are Woodbois shares a no-brainer buy now?

I didn't buy Woodbois shares when they were up over 8p. Now they've fallen back, I'm wondering if I'm seeing…

Read more »

Business development to success and FTSE 100 250 350 growth concept.
Investing Articles

Are we about to see a raging bull market for shares?

Investor sentiment looks like it's changing and we could be in the early stages of a bull market for shares…

Read more »

Black father holding daughter in a field of cows
Investing Articles

I’m investing just £5 a day in income stock to aim for £8,000 a year in passive revenue!

Income stocks form the core part of my portfolio, offering me passive income with minimal effort. But I'm reinvesting my…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

3 dividend hero stocks for a monthly passive income

This Fool discusses the investment trusts capable of paying him a lifetime of growing passive income to supplement his portfolio…

Read more »