Optimism and fear are in the stock market in apparently equal measures. Some shares have been recovering, but now investors fear a second stock market crash.
In some ways though, that’s all quite normal. Indeed, stock markets have always climbed a wall of worry, and the economic outlook is rarely crystal clear.
I’m handling the situation by investing with a very long holding period in mind. If there’s another market wobble, 10 years from now I’ll probably have forgotten all about it – if I choose good-quality investments.
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Solid-looking FTSE 100 investments
And one stock I’d head for is the FTSE 100’s SSE (LSE: SSE). The energy company’s share price remains well down from its pre-coronavirus peak. But in a trading update released on 27 March, the company confirmed its intention to pay the full-year shareholder dividend for the trading year to March.
Back in March, the business hadn’t suffered many ill effects from the pandemic. But the directors have reserved the right to stop dividend payments in the future, if necessary. However, with lockdowns beginning to ease, I reckon the worst could be over for the business.
Looking ahead, finance director Gregor Alexander said in the update, SSE’s long-term focus is to support the transition to a net-zero economy. And the firm has made “substantive progress” in recent months. He points as evidence to the company’s core, low-carbon networks and renewables businesses.
The focus on decarbonisation is set to continue. And I think holding shares in SSE will be a good idea over the coming years.
Shifting demand and a positive outlook
Branded consumer goods provider Unilever (LSE: ULVR) is another share that continues to languish below the high it achieved before the crisis. And I’ve always found the company’s defensive, cash-generating credentials to be attractive.
In the first-quarter trading statement released in April, chief executive Alan Jope explained there’s been higher demand in some areas of the business and falling demand in others. Meanwhile, the factories are still running to keep up with demand. And the company is opening new capacity where needed, “such as in hand hygiene and food.”
Looking beyond the immediate crisis and into a world with coronavirus, Jope reckons Unilever will continue to adapt and thrive. Meanwhile, the directors maintained the quarterly dividend. And, to me, that emphasises the positive outlook and underlines their confidence in the business model. I reckon Unilever could be a valuable addition to a long-term portfolio of shares.
A broad-brush approach to cyclicals
My third pick is the FTSE 100 index itself. I’d consider making regular investments in an FTSE 100 tracker fund with the aim of capturing the ongoing recovery in the market.
Since the easing of lockdowns began, some of the more cyclical shares have been recovering a bit. But it’s hard to pick the ‘right’ cyclical shares in the current environment. The underlying businesses of many companies will be badly damaged and may never fully recover.
However, the FTSE 100 contains many cyclical companies. And that’s why it responds so much to the ups and downs of the economy. By holding a tracker fund, I’d benefit from all the advantages of wide diversification across many underlying shares.
