There has been a rout recently across global stock markets, including the FTSE 100. The cause? Coronavirus. It’s impossible to tell when markets might recover but given no one can predict the future, it’s wise to be cautious. The FTSE 100 has hit its lowest level since July 2016. Following a drop of more than 3% on the morning of Friday 28th Feb. To add fuel to the flames, there are now fears of a recession, so undoubtedly, it’s a worrying time.
I saw lots of mentions earlier in the week on Twitter from people saying this will all blow over. With more countries now reporting their first cases this seems unlikely – and the market could well continue to fall.
For brave souls prepared to invest when others are fearful though income shares might be as good a place to think about investing money as anywhere else. I’d suggest avoiding brands with big exposure to China and wider Asia region such as Burberry and HSBC and Standard Chartered. Although my thoughts are not to invest until markets start to recover, if you do want to invest, I’d suggest looking at National Grid and Admiral.
Powering the UK and parts of the US
Shares in electricity distributor National Grid (LSE: NG) had been doing well. From the start of 2020 until the end of last week the shares were up 12%. It’s largely unclear to me why the shares had a good run other than the stock market was also doing well.
This week the shares have given up about 5% of their value. Not bad compared to others, but still not great.
I think at this time National Grid has a couple of things going for it. It operates in the UK and the US so isn’t exposed to Asia, it’s defensive so investors turn to it in troubled times and it has a decent dividend.
Giving up previous gains
The share price of insurer Admiral (LSE; ADM) had also had an amazing six months but had plateaued during 2020. Although all the gains have been reversed. From the end of August to the 21st Feb, the shares had risen by 7%. The shares are now back where they were in August.
Admiral does have one business in Italy – the European country most affected by coronavirus so far. Far more of the businesses it owns though operate in Spain, the UK and other markets.
Overall though the business is performing fairly well and I expect an insurer focused mainly on car insurance should be hit less hard by coronavirus than many other businesses so think it’s worth considering now the share price has dropped.
Including special dividends, the shares have a dividend yield of 6% so are above the average for the FTSE 100. That’s good news for an income focused investor.