{"id":89211,"date":"2019-07-16T20:38:50","date_gmt":"2019-07-16T20:38:50","guid":{"rendered":"https:\/\/stockchase.com\/discover\/?p=89211"},"modified":"2019-07-16T20:38:50","modified_gmt":"2019-07-16T20:38:50","slug":"7-ways-to-invest-during-the-coming-recession","status":"publish","type":"post","link":"https:\/\/stockchase.com\/discover\/7-ways-to-invest-during-the-coming-recession\/","title":{"rendered":"7 ways to invest during the coming recession"},"content":{"rendered":"<p>The S&amp;P just broke 3,000, the Dow made a new all-time high, and the TSX is flirting with its own. So, why worry about a recession?<\/p>\n<p>All analysts agree that the world economy is now late in the cycle and that this <a href=\"https:\/\/money.cnn.com\/2018\/08\/22\/investing\/bull-market-longest-stocks\/index.html\" target=\"_blank\" rel=\"noopener\">historic bull run<\/a>\u2014since 2009\u2014is propelled by cheap money. In other words, low interest rates are fuelling stock prices like crack feeds a junkie.<\/p>\n<p><a href=\"https:\/\/edition.cnn.com\/2019\/07\/10\/business\/federal-reserve-powell-house-testimony\/index.html\" target=\"_blank\" rel=\"noopener\">Strong hints by Jerome Powell<\/a> that the U.S. Fed will cut interest rates later this month have fuelled the current stock market highs.<\/p>\n<p>Good, right? Well, no.<\/p>\n<p>He&#8217;s cutting them because he fears US-China trade tensions and weak global growth. <a href=\"https:\/\/edition.cnn.com\/2019\/06\/07\/investing\/jobs-report-economy-slowdown-recession-signs\/index.html\" target=\"_blank\" rel=\"noopener\">American job growth is slowing<\/a>. Meanwhile, the ISM Manufacturing Index shows that <a href=\"https:\/\/edition.cnn.com\/2019\/06\/07\/investing\/jobs-report-economy-slowdown-recession-signs\/index.html\" target=\"_blank\" rel=\"noopener\">U.S. manufacturing has fallen<\/a> to its lowest levels during Trump&#8217;s presidency. That means, businesses may slow spending. The U.S. <a href=\"https:\/\/www.cnbc.com\/2019\/03\/25\/the-us-bond-yield-curve-has-inverted-heres-what-it-means.html\" target=\"_blank\" rel=\"noopener\">yield curve has inverted<\/a>, long a bellwether of a downturn.<\/p>\n<p>Then, there&#8217;s <a href=\"https:\/\/www.forbes.com\/sites\/johnmauldin\/2019\/04\/24\/the-us-economy-is-reaching-a-dead-end\/#9478c8835a0b\" target=\"_blank\" rel=\"noopener\">America&#8217;s ballooning debt<\/a>, now $22 trillion (with a \u201ct\u201d) and projected to top $25 trillion by the end of 2020.<\/p>\n<p>And the warning signs are not only flashing in the States.<\/p>\n<p>The <a href=\"https:\/\/www.worldbank.org\/en\/news\/press-release\/2019\/06\/04\/global-growth-to-weaken-to-26-in-2019-substantial-risks-seen\" target=\"_blank\" rel=\"noopener\">World Bank<\/a> warns that global growth is slowing to 2.6% and warns of \u201csubstantial risks\u201d starting with rising trade barriers. Here in Canada, analyst <a href=\"https:\/\/stockchase.com\/expert\/view\/1362\/Cameron-Hurst\">Cameron Hurst<\/a> warns investors to prepare for a recession within the next six to 12 months. Others says sometime in 2020.<\/p>\n<p>Fear not. There&#8217;s still time to cushion your portfolio. We offer seven suggestions:<\/p>\n<p style=\"text-align: center;\"><img decoding=\"async\" class=\"alignnone size-medium wp-image-89655\" src=\"https:\/\/stockchase.com\/discover\/wp-content\/uploads\/2019\/07\/Recession-quotes-1-760x475.jpg\" alt=\"Recession quotes\" width=\"850\" \/><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Discover What&#039;s Inside<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/stockchase.com\/discover\/7-ways-to-invest-during-the-coming-recession\/#1_Sin_wins\" >1) Sin wins<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/stockchase.com\/discover\/7-ways-to-invest-during-the-coming-recession\/#2_Garbage_is_defensive\" >2) Garbage is defensive<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/stockchase.com\/discover\/7-ways-to-invest-during-the-coming-recession\/#3_Discounters_pay_off\" >3) Discounters pay off<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/stockchase.com\/discover\/7-ways-to-invest-during-the-coming-recession\/#4_Utilities\" >4) Utilities<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/stockchase.com\/discover\/7-ways-to-invest-during-the-coming-recession\/#5_Microsoft\" >5) Microsoft<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/stockchase.com\/discover\/7-ways-to-invest-during-the-coming-recession\/#6_ETFs\" >6) ETF&#8217;s<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/stockchase.com\/discover\/7-ways-to-invest-during-the-coming-recession\/#7_cash\" >7) cash<\/a><\/li><\/ul><\/nav><\/div>\n<h3><span class=\"ez-toc-section\" id=\"1_Sin_wins\"><\/span>1) Sin wins<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>As <a href=\"https:\/\/stockchase.com\/expert\/view\/1366\/Ryan-Modesto\">Ryan Modesto<\/a> says, in good times and bad people go out for a drink with friends. In a recession, consumers may pass on a luxury cruise or a new flatscreen TV, but they will still tipple\u2014in fact, <a href=\"https:\/\/www.webmd.com\/mental-health\/addiction\/news\/20111013\/as-economy-goes-down-drinking-goes-up#1\" target=\"_blank\" rel=\"noopener\">more than in boom times<\/a>. They may be drowning their woes or indulging in a luxury they can afford when time are tough. A Canadian tailwind is cannabis, as booze-makers are expected to add weed to their product lines, following the lead of <a href=\"https:\/\/stockchase.com\/company\/view\/1397\/STZ-N\">Constellation Brands (STZ-N)<\/a>.<\/p>\n<p>Our recent <a href=\"https:\/\/stockchase.com\/discover\/top-6-distillers-wineries-stock-to-buy-in-2019\/\">Distillers Wineries Stocks To Buy<\/a> post examines the top wine stocks across North America, including <a href=\"https:\/\/stockchase.com\/company\/view\/26\/ADWA-T\">Andrew Peller (ADW.A-T)<\/a>, but investors may also want to look at Ontario craft brewer, <a href=\"https:\/\/stockchase.com\/company\/view\/180\/BRB-T\">Waterloo Brewing (BRB-T)<\/a>. <a href=\"https:\/\/stockchase.com\/expert\/view\/1221\/Colin-Stewart\">Colin Stewart<\/a> and <a href=\"https:\/\/stockchase.com\/expert\/view\/101\/Benj-Gallander\">Benj Gallander<\/a> feel that Waterloo (formerly Brick) is well-positioned to enter the cannabis space. Stewart adds that they are the second-largest craft brewer in Canada and their modern facility in Cambridge, Ontario boasts lots of excess capacity. And there&#8217;s always the chance that a big player could take it out. In the meantime, investors are paid a 2.53% dividend to wait, though should be aware that it can be volatile, since its average daly volume is only 5,688. (Disclosure: I own BRB-T)<\/p>\n<p>What about cannabis? This industry is consolidating less than a year after going legal and there are many wrinkles left to iron. Recently, Statistics Canada announced that <a href=\"https:\/\/business.financialpost.com\/cannabis\/cannabis-news\/legal-pot-price-as-much-as-80-per-cent-more-than-illicit-statcan\" target=\"_blank\" rel=\"noopener\">legal cannabis costs up to 80% more<\/a> than street weed. A legal gram costs $10.65, but only $5.93 illegally. Given the laws of supply and demand, I can&#8217;t see how cannabis companies can grow revenues Expect continued M&amp;A in this space, not yield.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"2_Garbage_is_defensive\"><\/span>2) Garbage is defensive<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>When the economy tanks, investors flock to defensive stocks. Defensives are steady-eddys that pay a constant dividend and producer stable earnings because the demand for their products and services don&#8217;t change in a recession. Garbage collecting and recycling fits the bill and <a href=\"https:\/\/stockchase.com\/company\/view\/143\/WCN-T\">Waste Connections (WCN-T)<\/a> is one such stock. Analyst <a href=\"https:\/\/stockchase.com\/expert\/view\/28\/Robert-McWhirter\">Robert McWhirter<\/a> (who owns WCN-T) says that garbage is a growing business that&#8217;s seeing a lot of acquisitions, hence opportunity. <a href=\"https:\/\/stockchase.com\/expert\/view\/81\/Bruce-Campbell-1\">Bruce Campbell<\/a> observes that WCN-T stayed flat while the rest of the market plunged in December 2018. He&#8217;s waiting for WCN-T to pull back before buying.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"3_Discounters_pay_off\"><\/span>3) Discounters pay off<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>When times are good, people spend at <a href=\"https:\/\/stockchase.com\/company\/view\/1355\/WMT-N\">Walmart (WMT-N)<\/a>. When times are bad, people spend at Walmart instead of high-end shops. A consumer staple stock, Walmart is a store that sells stuff (clothes, food) that people need at any point in the economic cycle. <a href=\"https:\/\/stockchase.com\/expert\/view\/1204\/Gordon-Reid\">Gordon Reid<\/a> notes that Walmart is surviving the <a href=\"https:\/\/stockchase.com\/company\/view\/67\/AMZN-Q\">Amazon<\/a> effect quite nicely by investing online, though <a href=\"https:\/\/stockchase.com\/expert\/view\/1341\/Zachary-Curry\">Zachary Curry<\/a> that cyber competition is fierce. Trading at $114, Walmart is currently hitting all-time highs.<\/p>\n<p>Closer to home, <a href=\"https:\/\/stockchase.com\/company\/view\/379\/DOL-T\">Dollarama (DOL-T)<\/a> is rebounding after suffering a serious pullback in 2018, triggered by a poor earnings report. <a href=\"https:\/\/stockchase.com\/expert\/view\/1008\/Paul-Harris-CFA\">Paul Harris<\/a> says Dollarama is largely immune from the Amazon effect. <a href=\"https:\/\/stockchase.com\/expert\/view\/1392\/Brian-Madden\">Brian Madden<\/a> adds that they enjoy high returns on capital and are outgrowing their competitors. <a href=\"https:\/\/stockchase.com\/expert\/view\/1274\/Christine-Poole\">Christine Poole<\/a>, however, doubts that same-store sales are sustainable and warns the stock is expensive at current levels. The fact remains that Dollarama has leapt 57% since the start of the year, far outstripping the TSX&#8217;s 16%.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"4_Utilities\"><\/span>4) Utilities<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>In good times and bad, we need electricity. Therefore, utilities are another defensive sector. They&#8217;re not sexy; they don&#8217;t offer explosive growth like a Shopify, but they pay strong, consistent dividends, plus additional yield when the stock price rises a little. In particular, analysts love <a href=\"https:\/\/stockchase.com\/company\/view\/78\/AQN-T\">Algonquin Power (AQN-T)<\/a>. They generate renewable energy (hydro, wind and solar) across North America and pay a 4.56% dividend that analysts predict will keep rising. <a href=\"https:\/\/stockchase.com\/expert\/view\/1313\/Greg-Newman\">Greg Newman<\/a>, for example, forecasts 11% dividend growth at 16.3x earnings that&#8217;s cheaper than peers such as <a href=\"https:\/\/stockchase.com\/company\/view\/503\/FTS-T\">Fortis<\/a> and <a href=\"https:\/\/stockchase.com\/company\/view\/422\/EMA-T\">Emera<\/a>. (Disclosure: I own AQN-T)<\/p>\n<h3><span class=\"ez-toc-section\" id=\"5_Microsoft\"><\/span>5) Microsoft<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>It may be surprising to see a tech giant on this list, since tech stocks are the epitome of gowth stocks, not defensives. However, <a href=\"https:\/\/stockchase.com\/company\/view\/820\/MSFT-Q\">Microsoft (MFST-Q)<\/a> has turned itself around under CEO Satya Nadella to be the nuber-two player in cloud computing behind Amazon. Research and advisory firm, <a href=\"https:\/\/www.gartner.com\/en\/newsroom\/press-releases\/2019-04-02-gartner-forecasts-worldwide-public-cloud-revenue-to-g\" target=\"_blank\" rel=\"noopener\">Gartner<\/a>, predicts global cloud revenue to grow 17.5% this year with no signs of stopping in the near future. Similarly, analyst <a href=\"https:\/\/stockchase.com\/expert\/view\/1362\/Cameron-Hurst\">Cameron Hurst<\/a> notes that Microsoft is enjoying 20% revenue growth that he expects to continue. <a href=\"https:\/\/stockchase.com\/expert\/view\/1282\/Barry-Schwartz\">Barry Schwartz<\/a> sees a long runway for growth as more business transition to the cloud. Also, Microsoft is rate tech stock pays a dividend, 1.33%. (Disclosure: I own MSFT-Q)<\/p>\n<h3><span class=\"ez-toc-section\" id=\"6_ETFs\"><\/span>6) ETF&#8217;s<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Why try to beat the TSX of S&amp;P 500 when you can own it? ETF&#8217;s offer one-stop shopping when you don&#8217;t know which stock to buy in a sector or country. Buy when the markets plunge to a 52-week low\u2014or lower. You can buy the TSX through the <a href=\"https:\/\/stockchase.com\/company\/view\/3336\/XIC-T\">iShares S&amp;P\/TSX Capped Comp. ETF (XIC-T)<\/a>. The MER is only six basis points, even lower than its cousin, <a href=\"https:\/\/stockchase.com\/company\/view\/1374\/XIU-T\">XIU-T<\/a>, and it offers broader exposure, notes <a href=\"https:\/\/stockchase.com\/expert\/view\/1285\/John-DeGoey\">John DeGoey<\/a>, to include large-, mid- and even small-caps. Now, choosing an American index ETF is trickier, because you must consider currency. Buy <a href=\"https:\/\/www.moneysense.ca\/save\/investing\/can-currency-hedged-etfs-protect-you\/\" target=\"_blank\" rel=\"noopener\">hedged or non-hedged<\/a>? Analysts are split, but currency hedging is preferred when the CAD is getting stronger, and unhedged ETFs are better when when the CAD is expected to decline. Another point: the CAD weakens during a recession, and analysts, including <a href=\"https:\/\/stockchase.com\/expert\/view\/1418\/Mike-Philbrick\">Mike Philbrick<\/a>, explain that the USD is a flight to safety when world markets struggle. <a href=\"https:\/\/stockchase.com\/expert\/view\/1293\/Terry-Shaunessy\">Terry Shaunessy<\/a> adds another factor: if you have a long-term horizon of two-to-five years, then go unhedged in the S&amp;P through the <a href=\"https:\/\/stockchase.com\/company\/view\/4758\/XUS-T\">iShares S&amp;P 500 Index ETF (XUS-T)<\/a>. The Canadian-hedged version is the <a href=\"https:\/\/stockchase.com\/company\/view\/2542\/XSP-T\">iShares S&amp;P 500 (XSP-T)<\/a>. The MERs of both are an ultra-low 0.11%.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"7_cash\"><\/span>7) cash<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Cash is boring, but cash is king. Cash buys cheap stocks and ETFs. Cash doesn&#8217;t lose 24% value in one months. The worst you can do is underperform, says analyst (not Rolling Stone) <a href=\"https:\/\/stockchase.com\/expert\/view\/1266\/Keith-Richards\">Keith Richards<\/a>, but you won&#8217;t lose money. So, how much cash to hold now and in the near future? <a href=\"https:\/\/stockchase.com\/expert\/view\/1266\/Keith-Richards\">Keith Richards<\/a> is holding 15% cash this summer, though sometimes holds twice as much. <a href=\"https:\/\/stockchase.com\/expert\/view\/101\/Benj-Gallander\">Benj Gallander<\/a> won&#8217;t reveal his proportion of cash, but normally holds alot to take advantage of buying opportunities. <a href=\"https:\/\/stockchase.com\/expert\/view\/1327\/Jon-Vialoux\">Jon Vialoux<\/a> has the final word: Take profits, even for a couple of days, and enjoy life.<\/p>\n<p>You can invest in these recommendations yourself at <a title=\"Questrade\" href=\"https:\/\/stockchase.com\/discover\/go\/questrade\/\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Questrade<\/a>, <a title=\"Questrade\" href=\"https:\/\/stockchase.com\/discover\/go\/questrade\/\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Canada&#8217;s leading discount brokerage<\/a>. <a title=\"Questrade\" href=\"https:\/\/stockchase.com\/discover\/go\/questrade\/\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Questrade<\/a> does not charge annual account fees for self-directed accounts, using their fast, free and easy-to-use platforms for mobile, desktop and web trading. Make informed decisions with powerful research, evaluation and monitoring tools. Or, get a diversified low-fee portfolio managed by a team of experts so you can get to your goals faster.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The S&amp;P just broke 3,000, the Dow made a new all-time high, and the TSX is flirting with its own. So, why worry about a recession? All analysts agree that the world economy is now late in the cycle and [&hellip;]<\/p>\n","protected":false},"author":12,"featured_media":89654,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"cwp_meta_box_check":"No","cwp_rev_product_name":"","cwp_rev_product_image":"","wppr_links":[],"cwp_rev_price":"","wppr_options":[],"wppr_pros":[],"wppr_cons":[],"footnotes":""},"categories":[9],"tags":[139,137,138,28,15,136,70,140,106,135],"class_list":["post-89211","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-top","tag-cash","tag-currencies","tag-dollar","tag-earnings","tag-etfs","tag-hedging","tag-investing","tag-microsoft","tag-questrade","tag-recession"],"wppr_data":{"cwp_meta_box_check":"No"},"_links":{"self":[{"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/posts\/89211","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/comments?post=89211"}],"version-history":[{"count":0,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/posts\/89211\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/media\/89654"}],"wp:attachment":[{"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/media?parent=89211"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/categories?post=89211"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/tags?post=89211"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}