Tariffs Are Here: 2 Ways Canadians Can Safeguard Their Savings

Consider BMO Covered Call Utilities ETF (TSX:ZWU) and another asset to help insulate your savings from tariff tumbles.

Trump tariffs have already rattled markets, and the pronounced swings are probably not yet over, especially if we’re in for a bitter back-and-forth trade war that could apply increasing pressure to consumers and economies on both sides of the border.

Indeed, a recession would seem inevitable if more tariffs were implemented. And while it seems like a reckless idea to double down or even triple down on stocks on the dip (whether we’re talking about the correction in the U.S. or the much smaller pullback here in Canada), I do think that not all stocks are at great risk of imploding in the early innings of what could be a long and brutal trade war.

In this piece, we’ll check in with two simple ways that Canadian investors can reduce volatility. Though the only way to truly safeguard your savings is to leave it in a savings account or Guaranteed Investment Certificate (GIC), which entails lower returns, the following assets, I believe, could be well worth the risk while they’re trading at relatively muted multiples.

edit Safe pig, protect money

Image source: Getty Images

BMO Covered Call Utilities ETF

For investors looking for added stability from tariffs, the utility scene looks like a great place to be. BMO Covered Call Utilities ETF (TSX: ZWU) takes the income and stability to another level, in my view. As you may know by now, BMO has a wonderful roster of covered call exchange-traded funds (ETFs) that effectively trade off upside for more income. It’s a trade-off that could be worth making if you think market returns will be hard to come by should tariffs bring forth stagflation, among other nasty effects.

When it comes to utility stocks, capital gains shouldn’t be the go-to reason to invest in them. In any case, I view the ZWU as a fantastic passive option for passive income investors to ride out what could be a doozy of a year. The yield sits at a stellar 7.7%. And while there have been bumps along the way, shares have exhibited a far lower correlation to the TSX Index (beta of 0.66). With a low beta and a huge yield, I’ve become an even bigger fan of the covered call strategy.

Gold bullion

If you couldn’t care less about passive income, gold is worth a look at these levels. Sure, it’s been putting stocks to shame so far this year, but I wouldn’t cash out just yet, especially if worse comes to worst and the trade war takes a turn for the worst. It’s something we don’t want to think about but should be prepared for!

And while there are a handful of ways to bet on gold, I think bullion is a great choice for those who have the secure means to store the asset. If you’re really looking to steady the sails before the next round of tariffs, there is no better gold standard, at least in my opinion.

The bottom line

Covered call utility ETFs, like the ZWU, and gold could be a one-two combo to help you put your guard up to defend against looming tariffs. It’s tough to pick between both, as I view them as incredibly timely at this juncture.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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