Is a Huge Market Correction Coming?

Canadians worried about the market correction might want to consider bolstering their investment portfolios with defensive assets like these two TSX stocks.

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The February and March 2020 market downturn was the most significant plunge the market has taken in recent history. The onset of COVID-19 and the realization of the severity of this global health crisis sent equity markets spiraling down. The Canadian stock market managed to do well in the months following its March 2020 low.

The S&P/TSX Composite Index climbed by over 80% between March 20, 2020, and November 12, 2021. Low interest rates, improved savings practices, and radical social spending allowed the Canadian economy to thrive, as reflected in the growth of the Canadian benchmark index.

With projections of rate hikes in 2022 and rising inflation, the situation has taken a turn for Canadian equity markets. At writing, the Canadian benchmark index is down by over 4.50% from its all-time high in November 2021. Canadian investors worried about the possibility of a huge market correction might want to consider the possibility that we could be seeing the starting signs of it happening right now.

Making defensive moves to prepare your investment portfolio for a significant downside correction might be an ideal move right now. Today, I will discuss two TSX stocks that could be a part of your investment portfolio to mitigate some of the capital risks you might face during a significant downturn.


BCE (TSX:BCE)(NYSE:BCE) is a Vancouver-based $59.56 billion market capitalization telecom giant that could be a viable asset to consider adding to your portfolio if you want to make defensive moves. The telecom sector has proven itself to be one of the most reliable industries during recent market corrections, and BCE has maintained its industry-leading position through them.

Regardless of what happens with the broader economy, telecom companies like BCE serve an integral role in the new normal during the pandemic. The company has boasted impressive figures throughout the pandemic, despite all the challenges. At writing, BCE stock is trading for $65.54 per share, and it boasts a 5.34% dividend yield that could protect your capital and grow your wealth while you ride out the wave of volatility.

Hydro One

Hydro One (TSX:H) is a Toronto-based $18.86 billion market capitalization company with a monopoly on electricity transmission and distribution in Canada’s most heavily populated province. The utility business is a defensive asset that you can rely on as a core holding in your portfolio due to its ability to remain stable during market corrections.

2021 has been an eventful year for the stock, with a downturn in January and September 2021. However, the stock has performed better than the broader market during the recent pullback. At writing, Hydro One stock is trading for $31.53 per share. It is up by 7.81% from its October 27 levels and by almost 9% year to date.

The stock boasts a juicy 3.38% dividend yield at current levels, and it could be a viable addition to your portfolio if you want to mitigate your losses during a downturn.

Foolish takeaway

COVID-19 has yet another strain spreading worldwide right now, sparking significant concerns among investors worldwide. It is unlikely for markets to crash to the same levels as they did during the onset of the global health crisis. However, there may be a high degree of volatility in the coming weeks.

It remains to be seen whether the stock market will go through another significant decline, but it is crucial to fortify your portfolio with defensive assets that can mitigate your losses.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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