A perky start to March trading is coming under pressure already. It didn’t take long but probably shouldn’t come as a surprise. News flow around the coronavirus remains fluid and investor reactions highly reactive.
The FTSE 100 leapt on Monday’s open on hopes central banks will step in to support the global economy. The Bank of England even said this morning it will see “all necessary steps are taken to protect financial and monetary stability.”
But market confidence has since dipped on news the Organisation for Economic Co-operation and Development had cut its forecasts for global growth. It lopped half a percentage point of its previous estimates, suggesting the worldwide economy will expand 2.4% in 2020.
It warned a more widespread and prolonged breakout in Asia-Pacific, North America and Europe could put paid to even these weak forecasts, however. In this event, it said global GDP would rise just 1.5% this year, around half of what it had been anticipating prior to the outbreak.
A spike in the global infection rate over the weekend has raised fears of a pandemic. Widely-reported comments from Paul Cosford, Public Health England’s medical director and one of the leading health officials in the UK, haven’t helped market confidence either. He predicts COVID-19 is “highly likely” to become widespread on these shores and possibly “fairly soon” too.
In times like these it pays to have exposure to some classic safe-haven stocks. You know, those that operate in areas which are more resistant to bumps in the global economy. Here we’re talking about defence companies, food producers, precious metals diggers, utilities providers and the like. They can help limit overall losses for your stocks portfolio.
Time to buy these Footsie dividend stars?
It’s also a good idea to have exposure to real estate too an it’s said bricks and mortar is one of the safest investments to make. People always need somewhere to live, of course, whatever macroeconomic or geopolitical turmoil is in the air. In this vein, I’d argue buying shares of Persimmon, Barratt Developments, The Berkeley Group and Taylor Wimpey is a good idea.
The FTSE 100-quoted housebuilders seem to be in a particularly good place right now. Latest Bank of England data showed the number of mortgage approvals for home purchase rose to 70,900 in January. This was the highest figure since early 2016, and reflects improving homebuyer confidence, the ongoing support of ultra-competitive mortgage products and low interest rates, and the helping hand of the government’s Help to Buy purchase scheme.
Recent heavy share price weakness leaves the aforementioned housebuilders looking mightily cheap. Each trades around bargain-basement forward P/E ratios of 10 times (aside from Berkeley, whose reading of 13 times still looks pretty cheap). All offer chunky dividend yields ranging 5.5% and 9.5%.
I think these shares, on account of their brilliant value and their decent defensive qualities, makes them top buys today.
Royston Wild owns shares of Barratt Developments and Taylor Wimpey. The Motley Fool UK has no position in any of the shares mentioned. 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.