When markets turn chaotic, investors tend to do what people do in storms - they look for shelter.
After Donald Trump’s sweeping tariff assault sent stocks into a tailspin, Panmure Liberum believes it’s time to go back to basics: Invest in high-quality companies with steady earnings, strong balance sheets and limited exposure to global turmoil.
In a note published on Monday, the broker urged clients to refocus on “quality defensives”. These are companies that can weather the economic squalls stirred up by trade tension.
The argument is simple: Tariffs increase uncertainty, disrupt supply chains, and raise costs. That’s a toxic brew for cyclical sectors. But businesses with resilient cash flows, modest debt and pricing power tend to hold up better when recession fears mount.
Which brings us to the UK market. Panmure has highlighted 14 British companies it believes tick those boxes. Leading the pack in consumer staples are British American Tobacco PLC (LSE:BATS), Imperial Brands PLC (LSE:IMB), and soft drinks group AG Barr PLC (LSE:BAG), businesses with reliable demand and little reliance on cross-border trade.
On the tech side, Alfa Financial Software stands out for its hefty 52% return on equity and almost no net debt, while data and analytics giant RELX continues to impress with consistent growth.
Healthcare isn’t left behind either. GSK and Hikma Pharmaceuticals both feature on the list, offering what Panmure sees as steady profitability with global reach.
And in industrials, Smiths Group and Intertek offer exposure to engineering and product testing services - sectors that can remain in demand even as broader investment slows.
Financials make a strong showing too, with names like St James’s Place, Beazley and IG Group included for their combination of solid returns and manageable risk. The note also flags real estate firm Big Yellow and IT distributor Softcat; the latter lauded for a 41% return on equity and negative net debt.
Behind the recommendations lies a simple truth: while Trump’s tariffs, including a minimum 10% import levy (and are far more punitive for countries such as China, Vietnam and Japan) - have shaken investor confidence, they’ve also created price dislocations.
Panmure argues now is the time to buy into defensives before a wider market rotation takes hold.
"In uncertain times, quality tends to show its worth," the note says. "And this correction should be no exception."
For investors unnerved by talk of recession, inflation and retaliation, that message may resonate. In volatile times, boring is beautiful — and balance sheet strength might just be the best defence.