Could tax cuts from the upcoming budget be good news for FTSE 100 stocks and the wider market? I certainly think so.
Two picks I reckon could experience some longer-term positivity linked to that are Unilever (LSE: ULVR) and IAG (LSE: IAG).
Here’s why I think they could benefit, and why I’d be willing to buy some shares when I next can!
Budget implications
Some news outlets are reporting today (5 March) that national insurance will be cut by 2%. This could potentially benefit 27m people, who could see £450 extra in their pocket, for the average person.
More money in my pocket sounds great! It means I could start planning my next holiday or look to bolster my (already massive, according to my husband) wardrobe.
This budget alone won’t instantly make people better off, and boost spending across sectors like those I’m going to cover. However, it could be the start of the road to economic recovery.
Issues such as soaring food and energy prices, linked to inflation, as well as higher interest and mortgage prices, still need to be tackled.
What they do
Unilever is one of the largest consumer goods businesses in the world with a wide reach and excellent brand power.
IAG is one of the biggest airline groups operating via long-haul and cheaper short-haul brands, covering a lot of the globe.
Both stocks are down 7% over a 12-month period. IAG shares have fallen from 154p at this time last year to current levels of 142p. Unilever shares have dropped from 4,107p to current levels of 3,782p.
My investment case
Starting with the bear case, Unilever shares have come under pressure due to inflationary pressures and economic turbulence. As people struggle with the cost of living, branded items are seen as a luxury. With the rise of budget retailers and supermarket disruptors, Unilever has been impacted. Continued volatility and higher costs could hurt the business.
For IAG, the aviation industry looked to be recovering since pandemic woes hit it hard. However, recent geopolitical volatility has made its outlook unclear. Continued issues across the world could hurt IAG’s performance, although, I’m one of the many hoping for peaceful resolutions to all conflicts.
To the bull case then. Unilever’s brand power and profile should help it overcome difficulties, in my view. Plus, it’s decided to ditch poorer performing brands, and invest further in those doing well. This change in tack could yield great results moving forward.
Similarly to Unilever, IAG’s diverse operations and brand power is too hard to ignore. Rather than focusing on one type of travel, budget for example, it operates many brands that cater to all. If peace were to be achieved across some conflicts, the business and shares could soar, if you ask me.
Finally, only Unilever shares would boost my passive income stream, offering a dividend yield of 3.8%. However, it’s worth noting that dividends are never guaranteed. IAG shares are very cheap, on a price-to-earnings ratio of just four!
