July could be another volatile month on the UK stock market as inflation-related worries rage on. So now might be a good time for me to invest in some safe-haven FTSE 100 shares.
Here are two non-cyclical FTSE shares I’m thinking of buying right now.
BAE Systems
It’s no surprise that BAE Systems’ (LSE: BA) share price has rocketed in 2022. The conflict in Ukraine has underlined the tense geopolitical backdrop that has caused arms spending to spike in recent years.
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Developments this week have boosted the sales picture for defence stocks like BAE too. Military alliance NATO announced plans to raise the number of its troops on high alert to 300,000 from 40,000. The group will also significantly boost the number of ‘brigade level’ battle forces in countries close to Russia’s border.
Meanwhile, British defence secretary Ben Wallace called for UK defence spending to increase to 2.5% of GDP per year. This is 20% above the current target.
Signs of a new Cold War between East and West — and fears over tensions in Asia — means demand for BAE Systems’ defence products should grow. Even as the global economy struggles countries will be reluctant to cut spending on defence needs.
I like BAE specifically because of the broad range of services it supplies. It has exposure to fast-growing and money-spinning categories like cyber security and submarines that can deliver solid long-term profits growth.
The range and the market-leading quality of its systems makes the firm a critical Western arms supplier too. Having strong relationships with UK and US armed forces — two of the top five defence spenders in the world — has obvious advantages for BAE’s bottom line.
While development problems at the company aren’t that common, fulfilling contracts is an ever-present risk that could damage future orders. Still, on balance, I think the benefits of owning BAE shares more than offset this danger. This makes the business a top buy for July.
Fresnillo
I believe Fresnillo (LSE: FRES) is another safe FTSE 100 stock this month. This is because I’m expecting worries over strong and sustained inflation to remain in place for some time yet.
This is an environment that boost prices of precious metals like the gold and silver Fresnillo produces. Demand for these safe havens could disappoint if the Federal Reserve keeps hiking rates and the US dollar strengthens. But as things stand I think the outlook for bullion values is mostly positive.
Just this week, the Bank for International Settlements (or BIS) warned that the world is reaching a “tipping point” where high inflation will become normal. On top of this, the worsening geopolitical backdrop could boost investor demand for flight-to-safety asset gold.
In such an environment, gold prices could fly supercharging profits at gold and silver mining stocks like Fresnillo.
