The latest stock market meltdown is enough to make investors cringe as the FTSE 100 index falls to six-month lows. If we forget about the stock market crash, however, we’ll find that there are big positives in the overall picture. The global economy is becoming healthier, which will impact select UK shares as well.
The US and Chinese economies are growing
Two facets of the global economy have my attention right now — the US and China. The US showed impressive growth in the latest quarter. As per forecasts by the International Monetary Fund (IMF), its likely to grow by 3.1% next year as well, beating growth levels in 2019.
We can add political outcomes to the mix, too. It looks like Democrats may be at the helm in the US next year when the recovery takes hold. Among other policy measures, the one that stands out for me is their stress on minimising fossil fuel dependence. That’s bad news for big oil, but great for the alternative energy industry.
This FTSE 100 stock could rise more
I think the most direct way to invest in this likely trend is through shares of the FTSE 100 asset manager, Scottish Mortgage Investment Trust, whose largest holding is Tesla at 12% of its total holdings. Amazon and Alibaba are the next biggest holdings. As you can well imagine, the SMT stock has sky-rocketed in the past months. It has doubled its share price since the stock market crash and is now at all time highs.
Moreover, I think it’s a great buy if we make investments based on the Chinese economic recovery too. Much like the US, China has also shown definite signs of recovery and 2021 promises to be a must better year for it too. SMT’s holdings in the likes of Alibaba as well as the Chinese communications and entertainment conglomerate Tencent, bodes well for it.
More options to hedge the stock market crash
However, with the US-China tensions likely to continue, US-listed Chinese companies could come under pressure. In keeping with that, I’d explore other stocks too. From the perspective of the US play, I think three FTSE 100 companies are worth considering – CRH, Johnson Matthey, and Rio Tinto. All three can benefit from recovery in the US. But a Biden win could give them an extra boost.
The FTSE 100 construction biggie CRH will get a boost from a government stimulus channelised towards infrastructure. Johnson Matthey and Rio Tinto will benefit from more environmentally friendly policies. I’ve talked about these companies in greater detail in my articles recently.
A boost from both US and China
Rio Tinto not just gains from a likely increase in US demand, it also gains if China recovers. It’s lithium finds are great for supporting the clean energy waves, but more generally, Chinese growth is good news for miners. China is a huge consumer of industrial metals, and all FTSE 100 miners are witnessing the benefits of this trend. RIO is no exception. I reckon it, along with the other options, are set to win, stock market crash or not.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Alibaba Group Holding Ltd., Amazon, and Tesla and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. 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.