As US economic growth slows I would buy these FTSE 100 stocks now


There is bad news from the US economy. Its growth slowed to 2% year-on-year in the third quarter of 2021. This is a sharp drop from the huge 6.7% increase seen in the last quarter. A host of reasons have slowed it down, including the increase in coronavirus cases and rising inflation.

What does a US slowdown mean for FTSE 100 stocks?

There is no denying the fact that the United States has a big impact on stock markets around the world. It is the country’s largest economy and many FTSE 100 companies have important interests in the economy. This means that there is a very real impact of a downturn in the US economy on the stock markets in the UK. In addition to this, weaker economic activity in the United States can also impact global investment activity, which can impact asset markets around the world.

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There are two ways of looking at the latest economic weakness. The first is to see it as a one-time slowdown in growth, but assume that the United States is otherwise on a high growth trajectory. The second is to see it as a sign of things to come. This may suggest that the recovery could also remain weak in the next quarter. Regardless of the correct line of thinking, as an investor, I have to prepare for both scenarios. Here are my FTSE 100 picks based on them.

FTSE 100 stocks to buy lower

If this is a one-time drop in growth, it could be a good opportunity to buy FTSE 100 stocks which have a strong presence in the United States. Consider the examples of construction-related stocks CRH and Ashtray. Both companies derive a substantial portion of their revenues from the US market. And it is not surprising that today their prices have dropped a little.

As of this writing, Ashtead is down almost 1% while CRH is down 0.5%. But over the past year, both have done well. Ashtead’s share price has more than doubled as CRH’s price is up about 30%. I think the small correction in their prices today is exactly the opportunity to buy these rising stocks for my portfolio.

Utilities are good defenses

However, if slowing growth is any sign of things to come, my best bets are defensive stocks. These include healthcare companies and utilities. One of the ones that I like is the water and sanitation company FTSE 100 United public services. It is financially sound, has a good dividend yield, and has even exhibited an upward trend in its share price over time. There are others to consider too, such as national grid and ESS, both of which produce energy.

My takeaways

Regardless of the scenario envisioned, I think it’s a good idea for me to have a diversified long-term investment portfolio. If growth slows, I can count on my defensive purchases to say the day. And if growth is high, cyclical stocks will benefit the value of my investments.

Manika premsingh has no position in any of the stocks mentioned. The Motley Fool UK recommended National Grid. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of ideas makes us better investors.


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