With UK investors bracing for a potential recession, plenty of FTSE 100 shares have taken a hit. Rising interest rates paired with high inflation set the stage for a severe economic slowdown. But it’s important to remember that this is the worst-case scenario. And it’s possible that a recession may not happen.
But let’s be pessimistic and assume the economy is headed for a downturn. What are the best shares for me to buy under such conditions?
Catering to reduced spending
During a recession, consumer spending tends to fall off a cliff, because people are trying to save their money or because they may have lost their jobs. And now that inflation is at a historic high, this effect is only being amplified. However, B&M European Value Retail (LSE:BME) might benefit in this environment.
The retailer sells a collection of branded household, food and beverage products at significant discounts under the B&M and Heron Foods brands. While there’s a more limited choice than at a supermarket like Tesco, the drastically lower prices make it an ideal shopping location for those looking to save.
Over the last 12 months, shares of the FTSE 100 company have dropped by nearly 40% after it reported slowing like-for-like growth. The slowdown is mainly attributable to tough comparables versus pandemic tailwinds. But while UK revenues might be flat, top-line growth in France has surged by over 30%.
There are other discount retailers looking to capitalise on the shift in consumer spending. And it’s possible that B&M will fail to retain its lead. But given the group’s track record, I’m cautiously optimistic. That’s why I’m considering this business for my portfolio today.
Buying critical FTSE 100 shares
Despite the challenging growth environment a spending slowdown creates, some things simply can’t be ignored. For example, healthcare. After all, if someone becomes severely ill or is injured, the economic climate won’t affect the need for medical treatment.
Two FTSE 100 shares that have caught my eye in this space are AstraZeneca and Smith & Nephew. The former is well known leading pharmaceuticals group specialising in various diseases, including cancer. And the latter is a medical devices manufacturer with an industry-recognised reputation for wound management and orthopaedic reconstruction.
Both groups have been delivering solid performances for decades. And that’s despite having to navigate arguably one of the most complex regulatory environments. The cost of developing new medical products isn’t exactly low. And the probability of success is even more unfavourable. That’s always a risk, of course.
However, these two firms have established product portfolios used in hospitals and health clinics worldwide. And with a long history of delivering value to shareholders, the recent volatility in the stock market makes these FTSE 100 shares look like a smart addition to my portfolio. At least, that’s what I think.