As a result of stimulative measures by governments and central banks, many stocks across markets are at all-time highs indeed, the S&P 500 is up over 90% from its 2020 lows!
However, as we move into a post-pandemic world, stimulative measures are being reduced to combat rising inflation and repay government debts. To put it simply, consumer and investment spending is likely to slow down or even fall, which will negatively affect businesses and therefore stocks.
Therefore, in the event of a stock market crash, I focus my attention on defensive, non-cyclical stocks, also known as blue chips. These are stocks of nationally recognised companies with stable earnings during good and bad times. Some non-cyclical industry examples include utilities, consumer staples, and healthcare. If the economy or stock market is down, the sick still need medicine and no one wants to shower with cold water – at least I hope not…
Cash flow is king
SSE is a multinational energy company headquartered in the UK. Though the stock experiences frequent variations in prices and has outperformed the FTSE 100 so far in 2021, the stock is ideal for me as I’m after passive income with my shares. SSE shares yield 4.98 % in dividends as of October 22nd, 2021, and dividend payouts have increased since the start of the pandemic. Comparing this to Apple shares, which yield a dividend of just over 0.6%.
Can’t go without medicine
Johnson & Johnson is a global holding company that engages in the research and development, manufacture, and sale of products in the healthcare field. It is arguably most known for its Covid-19 vaccine or its iconic baby shampoo that promise no tears. For more than 50 years, Johnson & Johnson has raised its dividend payments, qualifying the company as a dividend king!
During bad times, I look at stocks from a consumer point of view. Will consumers continue to demand pharmaceutical products? How about consumer health products? I’d say yes and therefore consider Johnson & Johnson a stock worth adding to my portfolio after a stock market crash.
Don’t forget household essentials
Unilever is a British multinational consumer goods company. The company owns companies that produce everyday household essentials thatconsumers require no matter the state of the economy or stock market. Like Johnson & Johnson and SSE, Unilever pays a relatively high dividend, which makes it an ideal asset for me as a passive-income investor. Furthermore, the case for Unilever is strengthened as the company achieved a stable increase in profits of €6,073 billion in 2020, up 0.78% year on year. However, the price of Unilever stock is yet to recover from the shock caused by the pandemic in 2020 and is down over 12% for the year at the time of writing.
Alexander Fazel has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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