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Could the next budget's tax cuts be good news for FTSE 100 stocks and the market in general? I certainly believe it.
I think two teams could experience some long-term positivity related to that: Unilever (LSE: ULVR) and IAG (LSE: IAG).
Here's why I think they could benefit and why I'd be willing to buy some shares next time I can.
Budget implications
Some media outlets are reporting today (March 5) that national insurance will be reduced by 2%. This could potentially benefit 27 million people, who could see an extra £450 in their pockets, compared to the average person.
More money in my pocket sounds great! It means I could start planning my next vacation or try to beef up my wardrobe (which is already huge, according to my husband).
This budget alone will not instantly improve people's situation or increase spending in sectors like the ones I am going to cover. However, it could be the beginning of the path to economic recovery.
Issues such as skyrocketing food and energy prices linked to inflation, as well as rising interest and mortgage prices, still need to be addressed.
What they do
Unilever is one of the world's largest consumer goods companies with a wide reach and excellent brand power.
IAG is one of the largest airline groups operating long-haul brands and cheaper short-haul brands, covering much of the world.
Both stocks are down 7% over a 12-month period. IAG shares have fallen from 154p this time last year to current levels of 142p. Unilever shares have fallen from 4,107p to current levels of 3,782p.
My investment case
Starting with the bearish case, Unilever shares have come under pressure due to inflationary pressures and economic turmoil. As people struggle with the cost of living, brand name items are considered a luxury. With the rise of budget retailers and supermarket disruptors, Unilever has been hit. Continued volatility and higher costs could hurt the business.
For IAG, the aviation industry appeared to be bouncing back since pandemic issues hit it hard. However, recent geopolitical volatility has made its outlook confusing. The continuing problems around the world could harm IAG's performance, although I am one of many who hope for peaceful solutions to all conflicts.
So, to the case of the bull. In my opinion, Unilever's brand power and profile should help it overcome the difficulties. In addition, it has decided to get rid of the brands with the worst performance and invest more in those that have good results. This change of direction could produce great results in the future.
Like Unilever, IAG's diverse operations and brand power are too difficult to ignore. Instead of focusing on one type of travel, such as a budget, it operates many brands that cater to everyone. If peace were achieved through some conflicts, business and stocks could skyrocket, in my opinion.
Finally, Unilever shares alone would increase my passive income stream, offering a dividend yield of 3.8%. However, it should be noted that dividends are never guaranteed. IAG shares are dirt cheap, with a price-to-earnings ratio of just four!
