The momentum that carried the FTSE 100 up from a low of under 5,000 to almost 6,500 seems to be fading. The FTSE has slipped back in recent days and is hovering around 6,000 as I write. 

The pullback appears to reflect concerns about the longer-lasting impact of the coronavirus pandemic. Much of the news and views I’m reading are inconclusive and contradictory, but I think I’m starting to see a pattern.

Retail and hospitality businesses are enjoying a strong bounce as they satisfy pent-up demand. But cyclical businesses which need to plan for the next couple of years are preparing for a period of weaker demand, by cutting capacity and laying off staff. 

Airlines, car makers and industrial firms with exposure to aviation and oil are among the examples on this depressingly long list. FTSE 250 builders merchant Travis Perkins joined the list on Monday, warning that “it is evident that the UK is facing a recession”

Of course, there may be an element of opportunism in this and other similar announcements. The pandemic will provide perfect cover for tough cost-cutting that might otherwise attract criticism. But I think it’s fair to conclude that many of the businesses which are starting to cut jobs do expect to face a slump in demand.

Safety in a storm?

Given this, where’s a safe place to invest? One option that comes to mind in the consumer sector is takeaway food - an affordable treat. 

I’d expect Greggs and Domino’s Pizza to do relatively well in a recession. The stock I want to look at today also fits this mould. Cake Box Holdings (LON:CBOX) is a high street business that sells fresh, hand-decorated cakes. The business model is essentially very similar to Domino’s; Cake Box franchisees run stores and buy supplies from the parent company.

The SIF Folio already contains bakery and cake maker Finsbury Food. By rights I should exclude Cake Box on grounds of diversification. But whereas my new pick last week, K3 Capital, implies a more bullish view on the economy, I see affordable fresh cakes as a far more defensive choice. 

Cake Box now qualifies for the relaxed version of my SIF stock screen. If the numbers impress me, I could be tempted to take a second…

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