Investing is dangerous in addition to rewarding, and I’ve been interested by two funding dangers that I’m fearful about specifically.

2024 was a reasonably good yr for the UK share market with the FTSE 100 gaining practically 6%. However now, with the yr changing into a distant reminiscence, my thoughts has turned to defending my portfolio within the months forward.

Whereas I’m optimistic about investing in UK shares, there’s loads of uncertainty on this planet and I’m contemplating shopping for GSK (LSE: GSK) shares in consequence. However first, let’s take a look at these two dangers.

Geopolitics

Final yr was the yr of elections. A giant chunk of the world’s inhabitants headed to the polls together with the US the place Donald Trump claimed victory to safe a second time period.

Analysts are watching rigorously to see what coverage modifications the brand new administration will put in place. Many are tipping that deregulation might pave the way in which for extra funding exercise together with mergers and acquisitions.

Alternatively, tariffs are broadly anticipated however simply how a lot and on which merchandise are unclear for now. These might effectively stifle international and UK financial progress in 2025, regardless of the British authorities’s efforts to spice up spending in key areas like housing.

Inflation pressures

Cussed inflation can be weighing on my thoughts. Potential commerce coverage modifications within the US might elevate costs simply because it had appeared inflation was coming below management.

Equally, elevated UK authorities spending might improve demand (and costs). Any giant surprises might effectively spook buyers as that might effectively imply the Financial institution of England takes a unique rate of interest coverage path versus expectations.

The place I need to make investments

These are simply two funding dangers which can be on my thoughts proper now and I’m trying so as to add extra defensive publicity to my portfolio.

The Footsie boasts numerous giant pharmaceutical corporations, together with AstraZeneca and GSK. The latter is the one which I’ve been narrowing in on in latest weeks as a possible purchase.

The resiliency of the sector is actually one a part of my considering. Nevertheless, I additionally like that it’s a UK-based firm with international footprint together with robust hyperlinks to the US.

Pharmaceutical corporations can usually move on rising prices fairly successfully to their clients, which might present one thing of an inflation hedge. I additionally suppose the corporate’s monitor report as a dividend payer exhibits it may be investor-friendly in returning capital.

Key dangers

After all, GSK isn’t proof against dangers. Whereas the corporate has been actively constructing its research and growth pipeline, there’s all the time uncertainty surrounding drug approvals in addition to fierce competitors from rivals.

Prospects may ultimately reject price will increase, which might damage profitability, as might fierce competitors from rivals.

Valuation

But the corporate’s 13.9 price-to-earnings (P/E) ratio is beneath the 14.5 common for the Footsie and appears a bit low cost for a big participant in a defensive trade. Rival AstraZeneca’s shares are buying and selling at a a number of of 32, albeit it does have a £167bn market cap in comparison with GSK’s £56bn.

I’m actually contemplating GSK shares as a approach to assist hedge in opposition to among the funding dangers I see looming in 2025. It’s one of many names up the highest of my record to purchase after I collect the funds to purchase.