At its last close, the FTSE 100 index fell below 7,000, the lowest point in over a year. This is part of a global come-off in stock markets that have become increasingly nervous as COVID-19 spreads. A sharp fall in stock prices of some of the biggest and best companies is scary. At a time like this, it can look like a prudent decision to keep money parked in a safe investment like the Cash ISA.
Cash ISA isn’t a safe harbour
But Cash ISAs offer such meagre returns that I’m not convinced they are a good investment. In fact, they run the risk of eroding real income overtime. Even though equities look like a riskier option, they could still be a better one. It’s true that in a stock market crash, some shares are best avoided. But others aren’t. Moreover, we haven’t hit a full-blown stock market crash yet.
What we do have is a decline in the FTSE 100 index, which could turn into one. A number of good shares are available at a discount already. At this time, I’m looking at my investing wish-list. This list has names of all the stocks I want to buy but that have been too pricey so far. Of these, I’d focus on those that will see sustained demand over time. In other words, I’m talking about defensives.
Considering consumer defensives
One example is Diageo, which belongs to the lucky category of goods that see limited demand slowdown in bad times and things only get better for them in good times. This FTSE 100 alcohol producer’s stock price was at sub-£30 levels at the last close, the lowest in over a year. It has robust financials and a single look at its stock price chart shows how rewarding it can be for the long-term investor.
Note that not all ‘sin stocks’ are made equal, however, as far as growth investing goes. Consider tobacco biggies like Imperial Brands and British American Tobacco. Both these FTSE 100 stocks offer high dividend yields, but their share prices have shown a dismal trend in recent years. The industry is in the throes of structural changes, and their long-term future depends on how well they transition into next generation products.
But there are plenty of other defensives to consider. Another example is the analytics provider RELX. If I had invested in the stock in January 2015, I’d be sitting on an over 70% capital appreciation. A well-timed purchase of the stock would have more than doubled my capital. I think this could also be a well-timed moment to buy, when its share price has dipped. Healthcare company Smith & Nephew is another example of a share to consider investing in right now.
It may sound contrarian, but a cyclical stock like JD Sports Fashion is attractive too. It was the best performer last year despite the persistent economic uncertainty. It’s definitely been on my investing wish-list and I think this maybe just the time to buy some of its shares.
It’s official: global stock markets have been on a tear for more than a decade, making this the longest bull market in history.
But this seemingly unstoppable run of success poses an uncomfortable question for investors: when will the current bull market finally run out of steam?
Opinions are split about whether we’re about to see a pullback — or even a bear market — in 2020. But one thing is crystal clear: right now there’s plenty of uncertainty and bad news out there!
It’s not just the threat posed by the coronavirus outbreak that could cause disruption — Trump’s ongoing trade-war with China and the UK’s Brexit trade negotiations with the EU rumble on... and then there’s the potential threat of both the German and Japanese economies entering recession...
It all adds up to a nasty cocktail with the potential to wreak havoc and send your portfolio into a tailspin.
Of course, nobody likes to see the value of their portfolio fall, but fortunately, you don’t have to go it alone. Download a FREE copy of our Bear Market Survival Guide today and discover the five steps we believe any investor can take right now to prepare for a downturn… including how you could potentially turn today’s market uncertainty to your advantage!
Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo, Imperial Brands, and RELX. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.