In 2021 we saw stock markets rally all over the globe. Some international indices like the Dow Jones in the US and Japan’s Nikkei hit record highs as Covid-19 vaccinations helped the global economy reopen and corporate profits to rebound. In the UK the FTSE 100 has risen by double-digit percentages in the year to date too.
But as we move into 2022 economies are slowing, putting company earnings back in danger. The coronavirus crisis is worsening again because of the super-spreading Omicron variant. Inflation is going through the roof due to product supply issues and escalating energy prices. And central banks are hastily hiking interest rates to curb eye-popping price rises.
10 stocks for 2022
I’m thinking about adding some classic ‘defensive’ stocks to my portfolio to protect myself from these challenges. The sorts of UK shares I’m looking at provide services that are in high demand at all points of the economic cycle. Here are 10 companies I’m considering buying.
Defence spending could rise again
Defence companies are classic investor lifeboats when economic challenges arise. Governments need to keep their arsenals well stocked at all times to protect themselves. In fact spending by Western nations is particularly strong today as tensions with Russia and China grow.
I’m thinking of buying industry goliath BAE Systems to ride this theme. The FTSE 100 company’s market-leading products across land, air and sea make it a major supplier to the US and UK armed forces, and by extension a very attractive investment target for me. I’m also looking at mask and body armour maker Avon Protection and flare and decoy manufacturer Chemring. I’d buy them even though any potential product failures could prove devastating to future sales.
A big year for general insurance?
History shows us that demand for general insurance products remains stable even during economic downturns. Travel insurance providers could take a hit if the pandemic rolls on and claim levels escalate. But on the whole, I believe many UK insurance shares should still perform strongly in 2022.
I reckon diversified products provider Direct Line Insurance Group could be a winner next year, helped by the colossal brand power of its divisions. I’d also buy motor specialists Sabre Insurance and Admiral as the legal requirement for drivers to have cover gives these businesses an extra layer of security. I think all three are great buys even as climate change threatens to send claims costs much higher.
Staying safe with UK utilities shares
I’m also considering snapping up some utilities shares to shore up my portfolio in 2022. Water supplier Severn Trent, electricity generator Contour Global and utilities infrastructure specialist Fulcrum Utility Services are three UK shares whose services should remain in high demand even if the economy tanks.
I’d also buy renewable energy stocks like wind power giant SSE as demand for low-carbon energy soars. I’d invest in all four of these shares despite the threat that regulatory changes could impact shareholder returns.
