Written by Adam othman at Motley Fool Canada
Recent stock market volatility has left many investors wondering if the dreaded market downturn is finally upon us. However, the last days of trading have seen the S & P / TSX Composite Index resume its uptrend.
While it’s impossible to predict when the next stock market crash will occur, we know it’s inevitable. Unfortunately, many investors start to panic at the first sign of a problem and unload their stocks to make the problem worse.
If you are fear of a market downturn, it would be interesting to prepare your portfolio by allocating part of it to safe havens that can protect your capital. Today I will talk about two Canadian stocks that can not only protect, but also grow your fortune despite the weakness of the stock market in the event of a downturn.
Fortis (TSX: FTS)(NYSE: FTS) is as secure a safe haven as you can get among Canadian equity securities. Alternative bond stock has a 47-year streak of dividend growth that got it through previous phases of tough economic environments, primarily because low-risk activity is virtually immune to business cycles.
Fortis owns and operates 10 utility companies in Canada, the United States and the Caribbean, providing gas and electricity utilities to 3.4 million customers. The demand for his services will not decrease regardless of what happens in the economy, virtually guaranteeing his income. Fortis also derives most of its income from highly regulated assets. This means that the business generates predictable cash flow.
A low-risk business that generates stable and reliable cash flow allows its management to comfortably fund its investment projects and the growth of dividend payouts. At the time of writing, the stock is trading at $ 57.14 per share and has a hefty dividend yield of 3.54%.
Gold is the traditional safe-haven asset that investors typically flock to during stock market crashes, as the price of the rare yellow metal is inversely proportional to the economy at large. Barrel gold (TSX: ABX)(NYSE: OR) is a Canadian stock that can give you exposure to rising gold prices during market downturns without ever leaving the stock market.
Barrick Gold is one of the largest gold producers in the world. Since the company’s income depends on the price of the underlying commodity, higher gold prices will improve its profit margins and drive up its stock prices. Barrick Gold jumped 75% between March and May 2020 for similar reasons. At the time of writing, the stock is trading at $ 23 per share, and it’s down nearly 27% year-to-date.
If a market downturn occurs and pushes gold prices up, Barrick Gold stock could see its market performance improve. This might be a great time to buy your stocks for a good price if you are worried about a significant drop in the stock market.
The possibility of a major downturn in global equity markets is becoming increasingly worrying. Evergrande, one of China’s largest real estate companies, is about to give way under its weight. If the company goes bankrupt, it could plunge the world’s second-largest economy into a recession that could catalyze global market weakness.
If the Chinese debt problem ripples around the world, it could devastate returns for Canadian investors as well. Whether or not a downturn in global markets occurs, it’s a good idea to prepare your portfolio and protect yourself from the effects of a market downturn.
Allocating a reasonable portion of your investment portfolio to safe-haven assets like Barrick Gold stocks and Fortis stocks could help you weather the storm and pull out a richer investor on another side.
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Foolish contributor Adam othman has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.