The stock markets continue to reel under geopolitical stress. Earlier today, the FTSE 100 index dropped to sub-7,000 levels. While it has recovered a bit as I write this Friday afternoon, the fact remains that it might still fall way below this level. It is a stressful situation, for sure. But if we can get past the sense of dread that it creates, the investments made right now could really be among the best ones we make in a decade.
Throwback to the stock market crash of 2020
As proof of that, I only need to look at what was going on just two years ago. Stock markets had started feeling the tension from the spread of the coronavirus, and we were just weeks away from the market crash. My China-focused investments like Burberry had already corrected sharply, as it was the first country to be impacted by Covid-19. The stock was down by more than 25% from its highs in January.
Others like the FTSE 100 British Airways owner International Consolidated Airlines Group were also feeling the heat, having lost almost half their value. But share price weakness was hardly restricted to vulnerable stocks. Even big defensive stocks like AstraZeneca were losing value, albeit at a much slower rate of around 5% from their January highs.
Lessons from my FTSE 100 investments
There are valuable lessons for me from this experience when I look at where the stocks are now. AstraZeneca, for instance, rose so much in the time to come that the levels from 2020 seem like the distant past. Even Burberry has shown a smart recovery, despite its recent weakness. Only International Consolidated Airlines is still struggling because of its massive debts and the fact that the pandemic dragged on endlessly, holding its operations back. I own all three stocks in my portfolio. While I am still making losses on the airline stock, on a net basis, across these three stocks I have still managed to make gains. And this is despite the current market weakness.
What I’d do now
Of course, in stock markets where you end up in uncertain times is a bit of chance. But it also tells me that if I make my investments strategically in defensive growth stocks like AstraZeneca or those in stocks that have a really long history of being around like Burberry, I could still come out ahead. Keeping this in mind, I am now buying FTSE 100 stocks that have dipped because of general market weakness.
These include the likes of healthcare and utility stocks. I am also keen on stocks that have really stood the test of time, including the World Wars and the Great Depression of the 20th century. Even if the Russia-Ukraine war continues, inflation reaches dizzying heights, and is even followed by a slowdown, in time I expect them to yield good returns.