Recession Fears? Here’s How to Protect Your Cash

If you fear a potential recession, here’s what you can do to protect your cash in the coming months.

| More on:
protect, safe, trust

Image source: Getty Images

The word recession appears more and more these days, just as it did in the months before the March 2020 crash. Back then, no one could have predicted that a global pandemic would still be surging through the world in 2022. However, there are a few reasons to believe a recession could soon be coming our way.

What’s been going on?

It started with the pandemic, leading stocks to grow higher and higher until a correction needed to happen. However, in 2022, a few more problems became apparent. First, there was the supply-chain issue. Then it was labour. This all led to inflation which then led to the increase in interest rates.

It’s this last issue that remains on the minds of recession-fearing Canadians today. The United States Federal Reserve may boost rates once more this month. The Fed is expected to raise it again to battle inflation — the highest it’s been in more than four decades. This all while the largest drop in half a century continues on the S&P 500 and the biggest since March 2020.

After the first increase since 2018 of 25 basis points, analysts expect the Fed to raise rates another 50 basis points. Investors should be concerned, as this could only be the beginning of a tightening monetary policy.

Is it all bad news?

Yes and no. Some analysts believe inflation has peaked, at least in Canada. Inflation rose from 5.1% in January to 6.7% in March of this year. While we’re still waiting on April numbers, this will be the signal as to whether inflation has peaked or not.

A peak would be good news, but the Fed increasing rates along with the Bank of Canada could lead to a recession that pushes the stock market down. This has increasingly put pressure on tech and growth stocks that have come down by remarkable levels.

Where to invest

If you want to protect your cash, there are a few options that analysts still love. First, there’s the Nexus REIT (TSX:NXR.UN). This company has a unanimous “buy” recommendation by analysts and a 5% dividend yield. It owns 106 industrial, office, and retail locations across the country. These are expanding opportunities, especially within the industrial sector. It remains cheap, trading at 7.85 times earnings, and shares are up 37% in the last year alone.

Then I would throw in a Big Six bank like Royal Bank of Canada (TSX:RY)(NYSE:RY). These banks managed to hold back credit loans from the pandemic and will now need it during a recession. But this will allow them to bounce back within a year, as they tend to do. And that includes Royal Bank, which trades at 11.71 times earnings with a dividend of 3.7% as of writing.

Shares are far down this year and are likely to fall further with a recession. However, given the fall it’s had already, it won’t be significant in the next few months. Plus, you’ll have a dividend cushion, along with the knowledge it will bounce back with those credit loan losses.

Foolish takeaway

A recession can be scary, but it can also be an opportunity for long-term thinking investors. So, continue to do your research and prepare yourself. That will make an economic downturn feel less terrifying in the months to come.

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 Amy Legate-Wolfe has positions in ROYAL BANK OF CANADA. The Motley Fool has no position in any of the stocks mentioned.

More on Stocks for Beginners

Family relationship with bond and care
Dividend Stocks

TFSA Investors: 3 Cheap Canadian Stocks for Retirees

These three Canadian stocks are super cheap for retirees looking for a great buy that will last the test of…

Read more »

A airplane sits on a runway.
Stocks for Beginners

Are Airline Stocks a Good Buy in December 2023?

Does the recent broader market recovery make Canadian airline stocks attractive to buy in December 2023? Let’s find out.

Read more »

edit Safety First illustration
Stocks for Beginners

For Friday: Safe Stocks to Buy in Canada for December 2023

The safest Canadian stocks may not be as obvious as it seems. Here are two safe stocks that have delivered…

Read more »

Value for money
Stocks for Beginners

2 Top Canadian Value Stocks in December 2023

Buying these top Canadian value stocks in December 2023 can help you expect big returns on investments in the long…

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Stocks for Beginners

Where to Invest $1,000 in December 2023

These stocks are the perfect option for those seeking to put some cash away, mainly because you won't see a…

Read more »

data analyze research
Stocks for Beginners

The 3 Top-Performing TSX Stocks in November 2023 (Are They Still Buys?)

These TSX stocks proved to be the best of the best over the last month. But the question remains as…

Read more »

railroad with nature background
Dividend Stocks

Buy 32 Shares in This Top Dividend Stock for $701.12 in Passive Income

You could be looking at dividend stocks all wrong. Which is why it's important to be clear about what makes…

Read more »

Dots over the earth connecting the world
Tech Stocks

Is Constellation Software Stock Worth a Buy in December?

Constellation stock (TSX:CSU) is up 46% in the last year alone, but after an earnings miss should investors still consider…

Read more »