Is now the right time to invest in a Stocks and Shares ISA?

For the most part, last week was absolute carnage in broader markets. So as we start a new week that has also begun badly, I’d like to encourage you to take a deep breath and think about your long-term financial goals, such as your retirement years. Perhaps you’re about to invest in a Stocks and Shares ISA. Then you’re possibly wondering if this new week could be a good time to put your money to work. 

Let’s take a closer look.

Stocks and Shares ISA deadline looming

On 12 March, the FTSE 100 plunged over 10% on its worst day since 1987. The following day saw some calm return to the markets. But none of us can know how this week or March will end.

However, Britons know that we’ve an important date coming up in a few weeks. As our tax year runs from 6 April to 5 April, the deadline for individuals to contribute to the previous year’s ISA is April 5. 

In other words, you’ve less than three weeks to use your £20,000 ISA allowance for this tax year. 

The rapid decline in stock markets is unnerving for many investors. Yet it’s hard to deny that it has created buying opportunities for long-term portfolios.

After all, if you liked a company for robust fundamental reasons and dividends in February, you should really like it even more when its share price is on sale now, especially if you buy it via an ISA that has tax advantages.

Are we in a recession?

Even though the market decline makes this potentially an opportune time to invest in many stocks, it’s also important to consider which industries to concentrate on.

We don’t know how corporate earnings may perform over the next few months. Many economists are debating whether a large number of countries may already be in a recession. 

As 2019 ended, several City analysts highlighted that we were possibly at the tail end of nearly a decade of economic growth. In spite of a few short-lived downturns over the past 10 years, most economies have enjoyed stable growth since the crisis of 2008/09.

We won’t know when the next recession has exactly started until we’re in it, but as we’ve been finding out in recent days, investor sentiment and the economy can change rather quickly. 

If you think an economic slump is upon us, you may want to reconsider your portfolio diversification strategy, including your Stocks and Shares ISA. Certain industries tend to do better in times of slower economic growth.

A resilient industry

Exactly what traits are common to defensive stocks? A defensive company typically has a constant demand for its products or services. It isn’t correlated to the rest of the business cycle either.

Analysts regard consumer staples companies as defensive. People continue to buy household items, cleaning products, and other essentials such as personal hygiene products, even when their salaries are shrinking. And the COVID-19 outbreak means everyone must pay more attention to basic hygiene than before.

Two stocks to consider for a Stocks and Shares ISA could be Reckitt Benckiser and Unilever. And supermarkets such as Sainsbury’s and Tesco could also be appropriate. Anecdotal evidence and social media posts suggest that many consumers are currently stockpiling. And we’re all going to continue to eat, drink, and shop for basic necessities even in a recession.