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When compared to the S&P 500, FTSE stocks in general have had a disappointing performance lately. Driven by ai and the rally in tech stocks, the US market has seen exceptional growth recently.
However, all that may change soon. Trump has promised sweeping trade tariffs that leave the future of the US economy in doubt. If things don't go as planned, the S&P 500's performance may decline. Both Goldman Sachs and J.Morgan They are pessimistic about the future of the index and expect annual growth of only 6% at best over the next decade. The forecast is partly due to the belief that the index is greatly overvalued.
Here in old Blighty, we haven't seen the impressive returns of innovative tech stocks. But we do have a lot of well-established, high-quality businesses with low volatility and reliable returns. As such, a faltering US economy could give way to more impressive growth at home.
Investors may want to consider the following two FTSE shares as a hedge against potential volatility overseas.
International Group of Consolidated Airlines
The parent company of British Airways, International Group of Consolidated Airlines (LSE: IAG), has been doing well lately, gaining a whopping 122.6% in the last year alone. But the gains do little to recoup the losses suffered during Covid: it is still down 23.6% in five years.
Now that air travel is back to normal and busier than ever, I think the stock has more fuel in the tank. In 2018, analysts were optimistic, looking at price targets of up to 600p for the stock. That would be about double the current price.
But the threat has not completely disappeared. Covid taught us a lot about how to deal with a pandemic, but not enough to stop travel bans should a similar contagion arise. If that happens, IAG shares could easily fall 70% like they did in early 2020.
Better planning can reduce the impact, but some losses would be inevitable.
Barring further disruption to travel, it could reach 600p in 2030. If it does, it would equate to an annualized return of 13.2%.
Alfa International Group
Alfa International Group (LSE: ALPH) is a lesser known system FTSE 250 stocks that could benefit from the disruption of international trade. The company specializes in foreign exchange risk management for corporate businesses.
It is a relatively small company, with a capitalization of £954.7 million, just under 500 employees and £53.3 million in revenue. But the recent growth is impressive: Revenue was up 19% year over year and net income was up 13.3%. Forecasters expect earnings per share to reach £1.15 by 2026, a 70% increase from current levels.
If the £22 share price follows suit, it could hit £40 in the next five years, an annualized return of 12.47%. That's not an unrealistic estimate, considering the share price doubled between the summer of 2020 and 2021. Since then, return on equity (ROE) has risen from 13.9% to a whopping 48.15% .
Despite these impressive numbers, growth has been slower lately. This is likely due to economic challenges in the financial sector, particularly high interest rates that curb spending. If rate cuts materialize this year, they could help dispel these problems, but if not, growth could stagnate again.
I think both stocks are worth considering as strong contenders to outperform the S&P 500 by 2030.
