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£3k to invest in an ISA? 2 UK shares I’d buy for a prolonged economic downturn

Royston Wild
·3-min read
Graph Falling Down in Front Of United Kingdom Flag
Graph Falling Down in Front Of United Kingdom Flag

It’s clear the global economy faces significant challenges over the short-to-medium term. Spiking Covid-19 infection rates across the globe means predictions of a severe downturn are rising too. It’s no wonder investor appetite for UK shares remains quite weak.

I can understand why stock investors are happy to sit on the sidelines today. But it’s not a strategy I’m prepared to follow. Sticking your money in a low-yielding cash account like a Cash ISA is a popular option for worried savers today.

Investment products like this aren’t as safe as you might think though. Why? Well rock-bottom interest rates means the value of your money is being steadily eroded by inflation.

I’ve continued to invest in a Stocks and Shares ISA instead. This is because there are plenty of UK shares that should still deliver excellent shareholder returns despite the tough macroeconomic picture.

Close-up Of A Piggybank With Eyeglasses And Calculator On Desk
Close-up Of A Piggybank With Eyeglasses And Calculator On Desk

Top UK shares for tough times

It doesn’t matter what your attitude to risk is. There are still stacks and stacks of top-quality UK shares that can make you a fortune, however soon and however strongly the global economy rebounds.

You can buy companies with defensive operations like telecoms providers, food manufacturers and electricity suppliers. Profits at firms like these remain stable during all points of the economic cycle.

We can also buy UK shares which thrive during tough economic times such as these. I’m looking at pawnbrokers, precious metals producers, budget retailers and insolvency practitioners, for example.

2 stocks set to thrive

There’s nothing wrong with being cautious during times like these. Indeed, it’s important investors carry out their research more diligently than ever before when considering which UK shares to buy. But there’s no reason for them to stop buying shares entirely.

Here are two UK shares I’m tipping to thrive even if the global economy struggles to rebound. I reckon they could make you a fortune:

  • As a Diageo investor myself I was reassured (but not surprised) by the latest trading commentary in late September. Despite the tough macroeconomic backdrop, the FTSE 100 drinks maker has made a “good start” to the new financial year, it said, and especially in its core US marketplace, thanks to strong consumer demand and the rising popularity of spirits. History shows us that alcohol sales pick up during recessions, even as broader consumer spending power decline. And Diageo, with its packed stable of market-leading brands, such as Captain Morgan and Guinness, is well-placed to ride this phenomenon.

  • Difficult economic conditions always help to boost precious metals prices. But the likes of gold and, by extension, gold-producing UK shares, will also benefit during the current downturn from extreme money printing by central banks. No wonder the experts at Jefferies expect bullion prices to surge to hit new record highs and average $2,200 per ounce in 2021. I’d buy shares in Greatland Gold to play this theme.

The post £3k to invest in an ISA? 2 UK shares I’d buy for a prolonged economic downturn appeared first on The Motley Fool UK.

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Royston Wild owns shares of Diageo. The Motley Fool UK has recommended Diageo. 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.

Motley Fool UK 2020