That’s right, inflation looks to be falling even further. That’s according to recent inflation data for October, which saw the Consumer Price Index (CPI) drop by 0.1% month over month. The inflation index is now down 3.1% year over year, quite the drop from peaks over 8%!
As inflation continues to hopefully drop, investors should certainly consider looking into stocks to buy as inflation cools – companies due to rebound, but remain down for now. Here are a few options.
Banks
The Big Six Banks haven’t been doing well, and the recent quarters were no exception. However, with inflation cooling it looks like loan losses might start to drop. These banks, though, have provisions for loan losses. This has allowed each of them to recover quickly even after downturns.
Yet, of course, you’re going to want the fastest recovery. That’s why I’d consider Royal Bank of Canada (TSX:RY) as a top stock to buy as inflation cools. The bank is the largest in terms of market cap, tied for first place from assets under management. What’s more, it continues to expand thanks to its wealth and commercial management sector.
RBC stock is, therefore, a great buy these days, with shares trading at 11.5 times earnings, down 11% in the last year, and offering up a superb dividend yield at 4.51%. As inflation cools further and RBC stock recovers, that yield isn’t bound to last. So for a quick recovery, this stock is definitely a top choice.
Consumer discretionary
Consumer discretionary stocks are another area of the market to check out. But not all of them. During the next few months, there is going to be major growth from holiday shopping. While many Canadians are looking to cut back, inflation cooling could allow some to realize they have more to spend than they thought.
There are a few consumer discretionary stocks out there to consider, but I like Canadian Tire Corporation (TSX:CTC.A) the best right now. After making some hard decisions to get finances under control, the company is now back on track. In fact, it’s due to see a major influx of cash from holiday shopping. Not just at Canadian Tire locations, but owned brands as well.
And again, shares of the stock are trading at 14.7 times earnings, and down just 3% in the last year. That could allow for a really quick boost back to 52-week highs. Plus, it offers a 4.89% dividend yield, which is far higher than the five-year average of 3.16%.
Tech stocks
The tech sector has been down for quite some time, but there has been a bit of movement upwards. The heavy hitters seem to be the ones making the biggest waves, but there are still many that remain far below fair value.
One of those is Lightspeed Commerce (TSX:LSPD), a company that recently became profitable. The ecommerce and point-of-sale (POS) company is ahead of its competitors in that regard, with its profits now being used to help its bottom line and expand its payments strategy.
This strategy should continue to see incredible gains in the next year and beyond. Yet, shares continue to trade at a fraction of all-time highs. In fact, shares of Lightspeed stock are up only slightly by 9% in the last year. Frankly, as investors come back on board during a growth market, Lightspeed stock is bound to be one of the first ones to climb straight upwards. And I’m unsure whether it will come back down again.
