UK shares are back on the defensive again as coronavirus-related news spooks investors. This time signs of escalating infection rates have sent stock markets lower. So have fresh quarantine measures slapped on travellers returning to Britain from Spain. Another stock market crash could be just around the corner should market confidence continue sinking.
I’m not too worried, though. I’ve built my shares portfolio in the knowledge that market crashes should be expected as the economic cycle evolves. As long as you build a balanced portfolio of quality UK shares with strong balance sheets then your investments should easily hurdle any near-term trading difficulties and deliver great returns over the long run.
Some experts don’t think that the British economy will bounce back from the coronavirus crisis until 2024. But this doesn’t mean that stock investors need to rip their hair out. Indeed, there are many UK shares out there that stand to gain from a severe and extended UK recession.
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2 top UK shares
Unfortunately economic downturns lead to an increase in the number of insolvencies. The number in the UK has already ballooned since the beginning of 2020. And there are plenty of companies in danger of going to the wall in the coming quarters.
It’s a phenomenon that will drive demand for the services of UK firms like Begbies Traynor Group. This AIM company provides a range of services for distressed businesses including beginning insolvency procedures. Indeed, executive chair Ric Traynor recently told the Financial Times that the number of insolvencies will be “in excess of what we saw in 2008” as liabilities build up and the government withdraws its financial support.
This tough economic environment also stands to benefit Manolete Partners, a company that funds insolvency litigation cases both large and small. In fact this AIM-quoted stock is already witnessing an uplift in client activity. It announced earlier this month that new case enquiries are “at all-time record levels [and] running at around double the rate we had this time last year”. And it has the financial clout to make the most of this tough economic environment.
Another way to ride the UK recession
Finally, I believe that H&T Group is one of those counter-cyclical UK shares you might want to buy in expectation of a long economic downturn. This particular AIM stock is one of the largest pawnbroker chains in Britain. It also offers loan services and buys gold from customers.
Profits took a hit as the coronavirus crisis forced it to close its shops. But trade has been brisk since then and H&T commented a month ago that “we are reassured by the volume of customers being serviced since we have safely re-opened our stores”. I expect its services to remain in high demand, too.
These UK shares show that the stock market is packed with companies that should thrive during an economic downturn. However, they are just a few of the top stocks out there that I’d buy today as the UK recession kicks in. I reckon now is a great time to go shopping for stocks.
