FTSE 100 shares have (largely speaking) got off to a solid start in 2023. The UK’s premier share index has risen around 4% since the beginning of the year.
Yet March’s share price slump underlines how fragile market confidence remains. Indeed, lingering worries about the global economy mean that further falls on the FTSE index could be near.
Some stocks on my radar
The International Monetary Fund has cautioned that the global economy could expand by just 3% over the next five years. This would be the worst rate for 33 years and might be a huge drag on corporate profits.
And more gloomy forecasts could be just around the corner that could pull the FTSE lower.
So right now I believe buying some classic defensive stocks could be a good idea. Even if macroeconomic conditions remain weak, such businesses might still deliver knockout shareholder returns.
Here are three I’ll look to buy when I have spare cash to invest.
#1: BAE Systems
The deepening geopolitical crisis is another threat to FTSE 100 share prices looking ahead. Russia’s invasion of Ukraine, allied with rising tension between China and Taiwan, pose a serious danger.
Yet defence stocks like BAE Systems (LSE:BA.) are likely to gain value in this environment. Project execution problems could harm profits growth here. But on balance I expect the company’s bottom line to rise strongly as Western nations bulk up their arms budgets.
BAE Systems’ share price rose more than 56% in 2022 due to the tragic war in Eastern Europe, making it the biggest riser on the FTSE 100. The company enjoyed record order intake above £37bn last year. And I expect its order book (which leapt by more than a third in 2022) to keep growing strongly.
#2: United Utilities
Getting exposure to some brilliantly boring stocks could pay off handsomely as the economy cools. Water supplier United Utilities is about as dull as it gets.
Keeping the water flowing is an expensive business. But profits at firms like this are much more predictable than those at most other FTSE index companies. Their services are in equally high demand during economic upturns and downturns. And suppliers don’t face competition threats either.
Some investors avoid water companies as regulators increase their environmental scrutiny of these businesses. But United Utilities’ strong environmental rating helps to soothe any fears I have. The company has a four-star rating with the Environment Agency.
#3: Diageo
Weak economic conditions can cause a sharp slump in consumer spending. Yet history shows us that demand for alcoholic drinks remains stable even during tough times. This is why I’m considering adding more Diageo shares to my portfolio.
Competition in the drinks industry is intense, which is a risk. But popular brands like Captain Morgan rum and Johnnie Walker whisky still give Diageo a tremendous chance to grow profits. In fact the firm has a great track record of long-term earnings generation in fact, and it has the marketing budgets to keep its products flying off the shelves.
I also like the drinks business because of its huge emerging market exposure. Sales could boom as alcohol demand in these regions grows.
