The FTSE 100’s market crash may mean that the popularity of Cash ISAs increases. After all, they offer less risk and a stable return. That matters as the FTSE 100 could see a further decline if economic growth is negative for much of this year.
However, over the long run the FTSE 100’s recovery potential seems to be high. It has a solid track record of delivering improving returns after its disappointing periods. Therefore, now could be the time to buy these two shares, as part of a diversified portfolio, to potentially bring your retirement date a step closer.
FTSE 100 utility stock Severn Trent
Unlike many of its FTSE 100 index peers, utility company Severn Trent (LSE: SVT) recently reported no change to its business performance since its last update.
As such, investor sentiment towards the company has generally been higher than towards the wider index. Its share price is down by just 1% so far in 2020. This compares favourably to the FTSE 100’s 22% decline over the same time period.
Should the economic outlook for the UK deteriorate, Severn Trent’s shares could enjoy high demand from investors. Its relatively low correlation with the macroeconomic outlook and solid track record of dividend payouts could make it an attractive proposition to a wide range of investors.
With the stock currently offering a dividend yield of 4.1%, it seems to offer good value for money. Certainly, it may not offer the recovery potential of many of its FTSE 100 index peers. But over the long run, its relatively solid financial prospects and high yield could lead to impressive total returns.
Another FTSE 100 share that been relatively popular among investors in recent months is aerospace and defence business BAE (LSE: BA). Its shares have fallen by around 10% so far this year. But this is less than half the FTSE 100’s decline, with the company’s recent trading update highlighting new contracts won since the start of the year.
Of course, a challenging period for the world economy could have a negative impact on BAE’s bottom line in the coming years. Government spending on defence may fail to rise at the previously expected pace if unexpected costs from the coronavirus pandemic lead to higher spending requirements elsewhere.
However, BAE has a strong financial position and a successful track record of delivering relatively consistent levels of profitability in spite of tough trading conditions. This could make it an attractive investment proposition. For example, it fared better than many of its sector peers in the last global recession. I think it could do likewise this time round.
As such, now could be the right time to buy a slice of the business as it seeks to expand its presence in growing markets through recent acquisitions and contract wins. Doing so could improve your long-term financial prospects.
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Peter Stephens owns shares of BAE Systems. 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.