UK share investors like me need to tread carefully before acting, given the rising threat of recession. Here are three FTSE 100 stocks I think are ideal stocks to buy during these tough times.
B&M European Value Retail
Retailers like B&M European Value Retail (LSE: BME) face a significant costs spike as energy, labour, freight, and product inflation balloons.
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However, I still think this FTSE 100 firm is a great buy for today’s climate. The growing stress on shoppers’ wallets means value retailers like B&M could be set to thrive.
The change in consumers’ behaviour is already becoming apparent. Almost two-thirds of people surveyed by McKinsey & Company said they have switched retailers, or swapped branded products for own-label goods, in the last four-to-six weeks.
Promisingly for B&M, a net 22% of respondents said they have shopped more at discount shops to stretch their budgets further. Revenues at B&M could rise sharply, in my opinion, as inflationary pressures worsen.
Fresnillo
Precious metals prices often soar as recessions emerge and investors get nervous. In this environment, the share prices of gold and silver producers like Fresnillo (LSE: FRES) can rocket to the stars.
It’s possible that demand for bullion and other flight-to-safety metals won’t ignite if the US dollar continues rising. The greenback, a safe-haven asset in its own right, has also risen in value on signs that the Federal Reserve will keep aggressively raising interest rates.
However, there’s a good chance that rates might not rise as many expect as the US economy slows. A higher-than-expected 218,000 people claimed unemployment benefits last week, a chunky weekly rise and another worrying sign for the economy.
There are other significant reasons to expect gold and silver prices — and with them profits at Fresnillo — to soar again. Rocketing inflation is a classic driver of precious metals prices. So is geopolitical tension like we’re seeing following Russia’s invasion of Ukraine.
BAE Systems
Defence stocks are some of the most popular shares when times get tough. Countries spend heavily to protect themselves against foreign invaders and other threats. This doesn’t stop when economic conditions worsen.
And this explains why BAE Systems’ (LSE: BA) share price has remained robust during the broader market sell-off.
It’s also fair to say that the FTSE 100 weapons builder’s been supported by the deteriorating geopolitical environment. Russia’s invasion of Ukraine has raised fears of a ‘Cold War 2.0’ between East and West. Moscow’s warning over Finland and Sweden’s attempts to join NATO have added fuel to the fire too.
Global weapons spending smashed through the $2trn barrier last year. I expect sales at leading weapons supplier BAE Systems to keep rising too as the US and UK armed forces respond to the new arms race.
