Broader markets seem to be stuck in a range. With the Fed (U.S. Federal Reserve) in focus once again, markets could easily sink or soar from here. In any case, it seems like inflation is calling the shots. And until inflation backs off, market volatility could continue to weigh heavily on investor sentiment. In such a blustery market, DIY investors could find a way to gain a slight edge.
Volatile markets are perceived as negative by many. However, for long-term investors, the bigger bumps in the road grant more opportunities to snag a bargain in the downs. In simple terms, when there’s panic in the air, Mr. Market tends to be a tad less efficient at his job — of marking securities at their intrinsic value.
In this piece, we’ll consider two “safety” stocks that may offer steady ground in an increasingly shaky market.
Consider precious metals firm Agnico Eagle Mines (TSX:AEM) and regional Canadian grocer Metro (TSX:MRU). Both firms, I believe, are great low-beta ways to stabilize your portfolio and gear up for a recession. Even if a recession results in a soft- or no-landing scenario, both firms should be able to help investors unlock less-correlated returns.
Agnico Eagle Mines
Agnico Eagle Mines is a well-run miner that’s up around 41% from its 2022 lows. With gold and silver recently picking up traction on the back of U.S. banking volatility, the big miners may be in a spot to make up for lost time. Indeed, when unforeseen risks present themselves, gold (and silver) prices can really take off in a hurry.
As volatility in the U.S. banking scene continues to take hold, I think gold could have more room to run. It’s not just financial sector risks that investors should bank on. Other risks not yet on our radar could hit between now and year’s end. Gold feeds off of the fears of sudden risks that blindside markets.
Arguably, it’s only prudent to be prepared for risk, as rate hikes work their way through quarterly earnings while running the risk of breaking other things (beyond the banks, perhaps). The stock has a 3.1% dividend yield, making AEM stock a productive way to hedge your bets with precious metals.
As gold rallies, AEM stock should be expected to amplify gains. On the flip side, a pullback could hit AEM investors hard. The miners are a choppier ride than spot prices for precious metals. In any case, I find the ride to be worth riding at these levels.
Metro is a top grocer that’s fresh off a correction (a plunge north of 10%). With one of the lowest betas (0.02) on the TSX, MRU stock is less likely to follow in the footsteps of the TSX. These days, the TSX Index seems greatly influenced by the U.S. markets, which, in turn, is moving on the Fed and inflation data.
Indeed, it’s tiring to have markets surge and plunge on the back of near-sighted data. If you’re looking for stability and recession-resilient operating cash flows, Metro is a magnificent holding. You won’t get rich off the name in the event of a market rebound. But you will get steady performance over the long run. Right now, shares are quite cheap at 19.4 times trailing price to earnings. The 1.7% dividend yield is a nice bonus.