The Motley Fool

The Recession Threat Is Real, But Here’s 1 Place You Can Hide

Image source: Getty Images.

Last year, the threat of recession seemed like more of a hot take than a genuine concern. That’s not so this year, given inverted North American yield curves, incessant trade crises, geopolitical tensions, among other market stressors, any one of which might have caused widespread panic in a normal year.

But 2019 has been far from a normal year, with volatility impacting most asset classes that culminated in a bloodbath at the end of May leading into the start of June. And now David Rosenberg, chief economist and strategist at Gluskin Sheff + Associates, just called the U.S. recession, pipping other market pundits to the post.

In an interview with BNN Bloomberg, Rosenberg side-stepped GDP as the go-to indicator of a recession and pointed to four other significant metrics that signal a depressed market: “If you look at household employment, you look at real business sales, you take a look at industrial production, which, by the way, is in a recession, and take a look at organic real income in the U.S. — [it] peaked in December.”

Rosenberg, who back in March warned that Canada itself was “one notch” away from recession, added ominously, “The global economy is going to cave with the U.S.”

Where should Canadians put their money at the moment?

As we saw at the end of May and in the beginning of this month, even the very safest assets — such as gold — are vulnerable to the unique mix of market stressors currently swirling over the investment landscape. Though bank stocks certainly have their detractors at the moment, their recovery was swift, and, along with diversified utilities, have seen investors return after their worrying dip at the start of June.

Of the two asset classes, however, utilities are arguably the safest. Households feeling the pinch would have to prioritize energy, even during the harshest downturn, or so the theory goes. Even if this turned out to be overly simplistic in real life, as an idea, it’s prevalent enough to affect the way in which people invest.

5 TSX Stocks Under $5

Click here to learn more!

One utility stock to rule them all

There’s a reason why Fortis (TSX:FTS)(NYSE:FTS) stock in particular is being touted as a defensive dividend stud right now. In fact, there are several reasons — any one of which would make a compelling argument for investment.

Fortis pays a 3.45% yield, and while this is far from the highest-yielding stock on the TSX, it’s still a higher percentage than the bottom 25% of Canadian passive-income stocks. It’s also backed up with rising payments that have been stable over the past 10 years.

Fortis has also outperformed the Canadian electric utilities sector in the past 12 months, which itself rewarded shareholders with returns of 21.2%. The fact that Fortis managed to beat this by an additional 4.5% is particularly impressive given the challenges faced by the energy industry of late.

The bottom line

Few utilities stocks have the kind of defensive clout commanded by Fortis. As Canada’s largest private utility presence, it makes sense to buy and hold shares for some relatively assured passive income through a potentially turbulent period.

5 Canadian Growth Stocks Under $5

We are giving away a FREE copy of our "5 Small-Cap Canadian Growth Stocks Under $5" report. These are 5 Canadian stocks that we think are screaming buys today.

Get Your Free Report Today

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.