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The UK faces the worst and longest recession in the G7. Simultaneously, there are bullish expectations for the FTSE 100 to exceed 8,000 points by the end of the year. I think it’s a mixed picture to say the least.
By no means is a deep recession guaranteed. Neither is it guaranteed that the FTSE 100 index will surpass the 8,000 mark. Nevertheless, I intend to diversify my portfolio with some dominant FTSE 100 shares that can perform. Ideally this performance will come regardless of the performance of the domestic economy.
Domestic pain or global gains
A recent survey by the Financial Times highlights that Britain is expected to have the harshest recession out of the G7 nations. So, I am more focused on the global-facing FTSE 100 than the more domestically concentrated FTSE 250.
Fortunately, I believe the FTSE 100 is stacked with the best monopoly stocks for me to pick from.
The consumer staples sector is one of the most consistently best performing in my eyes. Consumers will always purchase food, household products, and alcohol, regardless of financial means. Naturally, the market leaders within this sector appeal to me.
FTSE 100 consumer defensives
Consumer defensive specialists Unilever plc and Diageo plc are my favourite picks currently.
Despite intense margin pressure, Unilever was one of the FTSE 100’s steadiest performers in a volatile 2022. I attributed this to its startling pricing power. The company is experiencing a broad reduction in sales volume. However, the underlying business still posted higher sales due to being able to raise prices significantly.
With this pricing superpower, I expect to see greater demand for the shares if overall business conditions deteriorate. Although, I must still be mindful that sales volumes can decrease even further if inflation remains stubbornly high.
Meanwhile, beverage-marker Diageo’s diverse product line in the industry works in its favour. The company’s sales, operating profit, and margin all grew in turmoil-ridden 2022. For me it is the definition of consistent performance come sleet or snow. So, I was shocked to find the stock’s valuation fell by almost 10% in the last 12 months.
However, the discount may be justified. North Americans are buying drinks in smaller volumes. It’s not ideal as the company generates a third of its sales from this region.
Resilient FTSE 100 shares
A well-balanced portfolio during inflationary and recessionary times is a must for me. Despite respective headwinds, I believe FTSE 100 shares like Unilever and Diageo can enhance my portfolio value going forward. Most importantly, this can be in a negative or positive growth environment.
In my opinion, the consumer staples sector is most notable for having stocks where the underlying business performs consistently. This is regardless of changing economic conditions or the phase of the business cycle.
For this reason, I’m itching to buy shares in either stock this year. I just need to be wary of the costs I’ve been racking up for my recent portfolio changes before I make my move.
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