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UK shares have delivered some impressive returns in 2025, with the UK’s flagship index rising by over 17% since the start of the year. And that’s before counting any dividends.
Nevertheless, with economic concerns on the rise both here and across the pond in the US, the market has started to pull back slightly since the end of October. And some bearish investors have started to speculate that a new stock market correction is about to kick off.
Given that valuations have gotten stretched, it’s easy to see why some investors are getting nervous. But it’s important to remember that predicting the stock market in the short term is exceptionally difficult. Nevertheless, let’s assume the worst and say disaster’s looming.
What are the best stocks to buy now to protect a portfolio from a volatile market downturn?
Recession-resistant stocks
During economic downturns, most businesses suffer a slowdown in sales and demand. But that’s not the case for certain industries.
Consumer staples, utilities, and defence have historically continued to chug along nicely, given that demand remains largely unaffected by temporary slowdowns in economic activity. And looking across these defensive sectors, Reckitt Benckiser (LSE:RKT), National Grid (LSE:NG.), and BAE Systems (LSE:BA.) have all proven to be recession-resistant businesses in the past.
Reckitt’s essential household products across its various brands, such as Dettol and Strepsils, have kept revenues and dividends flowing. National Grid operates with long multi-year development contracts often backed by government spending that keeps earnings growing throughout the economic cycle. BAE Systems is in a similar situation, with national defence budgets often being maintained even during recessions.
All investments have risk
Sadly, past performance doesn’t guarantee future returns. And even with their desirable defensive traits, each of these UK shares still has its weak spots.
Reckitt Benckiser remains exposed to input cost inflation, and it may struggle to pass onto consumers during a recession. As such, even if sales remain stable or continue to grow, earnings might still come under temporary pressure.
Meanwhile, National Grid’s a heavily regulated entity with price caps limiting earnings growth – a significant handicap for a business that relies on substantial debt financing. And as for BAE Systems, with governments being its primary customer, the business is sensitive to changes in policy.
Even if defence spending remains uncut, national defence projects can nonetheless be postponed or delayed as part of austerity measures or shifting political priorities, causing growth to slump.
The bottom line
Despite their challenges and threats, all three of these businesses have demonstrated a knack for navigating through weak operating environments and emerging stronger than before. That’s why, even with their risks, I think investors who want to be more defensive in the current market climate may want to consider taking a closer look.
Yet these aren’t the only UK shares I’ve got on my radar right now.