Major stock markets around the world have been hit with short-term losses as the impact of US trade tariffs take hold. Since the beginning of March, several global indexes have suffered declines, leaving analysts to question what’s the best game plan.
The FTSE 100 is down 4.3% and the more domestically-focused FTSE 250 is down 3%. That equates to a loss of approximately £85bn in market capital for FTSE 100 companies and £9.5bn on the 250.
In the US, the S&P 500 is down 6.5% and the Dow Jones has lost 900 points, down 5.6%. On Monday, the tech-focused Nasdaq suffered its worst single day since 2022, slipping 4%. Overall, the US market is said to have lost around $4trn since recent highs in February.
Major European indexes also experienced declines, reflecting concerns about the broader economic implications of the US-Canada trade dispute. Similar losses have been seen in India, Australia and Japan. Only Hong Kong’s Hang Seng index seems to be doing well, up 3.3% this month.
Safe havens
Brokers are scrambling to rebalance assets into safe havens, leading to a boost for gold and government bonds. But it seems there’s no end in sight for the bleeding, as Trump remains defiant about trade tariffs.
But there’s no need to panic and such times also come with opportunities. UK investors may consider adopting defensive investment strategies to mitigate potential risks.
Defensive companies typically provide consistent dividends and stable earnings regardless of the overall state of the market. They’re often less susceptible to economic downturns and recessions.
Examples of good defensive industries include healthcare, consumer staples and utilities. No matter how bad the economy gets, people need the services provided by these companies.
UK investors looking to add more defensive stocks to their portfolio may want to consider National Grid, Unilever, AstraZeneca and Tesco (LSE: TSCO). As the UK’s largest supermarket chain, Tesco is a particular favourite of mine.
Let’s see why.
A market leader
Selling essential goods like food and household items makes supermarkets more resilient than cyclical businesses that rely on discretionary spending. Tesco’s market dominance puts it in a good position to withstand economic headwinds.
Price action has been impressive of late, up 85% since a five-year low in late 2022. On 14 February 2025, it hit a five-year high of almost 400p but has slipped to 370p since.
Yet, despite being highly defensive, it’s not without risk. The company employs 300,000 staff, so the recent budget increases in National Insurance and wages ramped up costs. The threat of food inflation is another risk that could send cash-strapped shoppers looking for cheaper alternatives.
Price-matching programmes have been implemented to challenge this but they are only so effective. One big plus is the company’s Clubcard scheme, which helps keep its 23m+ members loyal to the store.
It’s trading at fair value, with a price-to-earnings (P/E) ratio of 13 and a low price-to-sales (P/S) ratio of 0.4. That suggests revenue is good and growth potential is moderate.
This is reflected in the stock’s 12-month price targets, which all sit in a tight range between 375p and 440p. When analysts have close agreement on price targets, it’s generally a good sign of consistent, reliable gains.
That’s why it has always been a core part of my defensive portfolio!
