In what’s shaping up to be a potentially uncertain end to the year, current trends towards safety and away from risk are likely to be amplified. While a positive turnaround in world affairs could happen, and there’s nothing ruling out a rally in the year’s last quarter, the signs are pointing towards flat markets at best with a widespread correction still on the cards.
What’s driving uncertainty in the markets?
The global outlook has been grim for some time now, and while investors have been migrating towards safe-haven assets of late, a full-on exodus could be on the way. The list of serious potential market disruptors is long and dangerous. From Middle Eastern oil flashpoints and an exacerbated Sino-American trade war, from unrest in Hong Kong to profound political upheaval in the West, a correction could come at any moment.
With weak manufacturing data and slowing job growth, the economies of the U.S. and Britain are on the cusp of change, but what lies on the other side is anyone’s guess. The economies of the E.U. bloc are decidedly mixed, while China, India, and Oceania surge ahead. Indeed, the economic world order could get a reshuffle on shifting inequality in the coming years.
Two crucial factors could usher in a correction. Just across the border in America, an impeachment process is gathering momentum and could lead to a breaking point in U.S. politics. Meanwhile, across the Atlantic, a deferred Brexit could open the door to a general election in the U.K. and with it the opportunity for a second referendum. In short, the Western world could look rather different this time next year.
While Canadians have already been reacting to uncertainty by shedding risk and piling into safe-haven assets such as gold, these trends could be amplified within the coming months. Any big political upset in the U.S. and/or Britain is likely to send shock waves through the markets, meaning that current sell-offs could become bloodbaths while growth spurts could become all-out bull runs.
A pure-play on Canadian gold
Wesdome Gold Mines (TSX:WDO) came in at number 19 on the first-ever TSX 30, a list of the fastest-growing companies by share price appreciation over the last three years. Wesdome is a solid choice for investors cautious about cross-border issues, as it is focused entirely on Canadian assets. With a one-year return of almost 60%, Wesdome is a strong choice for the defensive growth investor looking to increase gold exposure.
The miner is sitting on capacity of over 200,000 ounces from two strategic gold mines located in Quebec and Ontario and can boast an impressive track record of continual mining operations in the country that stretch back for more than three decades. Its share price has rocketed more than 170% over the last three years, making this key metals and mining stock a top pick for growth investors.
The bottom line
Gold is a strong play for the general investor looking to hide during a market downturn. Wesdome in particular offers high returns and a land-locked pure play without the risk that some international mining operations bring with them. As uncertainty mounts in global markets, gold is likely to continue rising, making precious metals a strong play for wealth creation as well as safety.
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.