The UK stock market hits new highs – but should investors tread carefully?

The UK stock market’s just wrapped up its best month since January, with the FTSE 100 climbing almost 5% in October and hitting a record high of 9,787 points. The index’s surge was powered by strong corporate updates despite stubborn inflation data – yet fears of an impending crash linger.

That optimism has caught many by surprise. Analysts who expected higher interest rates or slowing growth to trigger a pullback have instead watched share prices continue to soar. 

But history suggests that markets rarely move in a straight line, and when things start looking too good to be true, a correction often isn’t far behind. In times like these, it’s worth pausing to think about what a sensible investor should do next.

Erring on the side of caution

Billionaire investor Warren Buffett may be quietly preparing for a market wobble. His conglomerate, Berkshire Hathaway, has built a record cash pile over the past year — more than $344bn by some estimates. Meanwhile, it’s been adding exposure to defensive shares such as homebuilder Lennar, energy group Chevron and drinks giant Constellation Brands.

It’s a reminder that when markets start to look overheated, seasoned investors often turn towards companies that can keep revenues steady even when the economy cools. These defensive businesses, whether in energy, healthcare or consumer goods, tend to offer a refuge when volatility creeps back in.

For UK investors, the question becomes: how can that strategy be applied closer to home?

Defensive UK stocks

Fortunately, the FTSE 100 has no shortage of defensive picks. Utilities such as National Grid and Severn Trent keep cash flowing regardless of the economic cycle. Consumer staples including Unilever and Tate & Lyle sell products that remain household essentials even in lean times. 

But one company that stands out for me right now is GSK (LSE: GSK).

The pharma giant recently upgraded its full-year outlook after stronger-than-expected results from its speciality medicines division, which covers HIV and oncology treatments. It now expects 2025 turnover growth of 6%-7% (up from 3%-5%) and core operating profit growth of 9%-11%.

The momentum has been driven by new product launches and expanding vaccine demand — an encouraging sign of the company’s post-split transformation finally bearing fruit.

That said, it’s not all plain sailing. GSK still faces challenges including patent expiries, potential regulatory setbacks and ongoing pricing pressures, particularly in the US vaccine market.

The company admitted that demand fluctuations and government procurement changes have created difficulties for growth there. So while I think it’s an appealing stock to consider for those seeking income and defensiveness, it’s also one that requires patience and a long-term outlook.

Final thoughts

The stock market may be setting record highs, but investors should stay grounded. Periods of strong momentum can mask underlying risks, and even solid blue-chips can falter when sentiment shifts.

Defensive shares like GSK, National Grid and Unilever might not deliver explosive growth, but they offer something that’s arguably more valuable when markets get choppy — stability.

In my view, it makes sense to keep some cash ready, diversify across sectors, and weigh up steady dividend payers that can ride out turbulence.

The FTSE 100’s rally may continue, but smart investors know it never hurts to prepare for rain — even on the sunniest days.

The post The UK stock market hits new highs – but should investors tread carefully? appeared first on The Motley Fool UK.

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Mark Hartley has positions in GSK, National Grid Plc, and Unilever. The Motley Fool UK has recommended Constellation Brands, GSK, National Grid Plc, and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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