With the Trump trade war and back-and-forth tariffs potentially on the table, it’s easy to put off any buying for your TFSA (Tax-Free Savings Account) or RRSP (Registered Retirement Savings Plan) you would have done had conditions been a tad more normal. Indeed, there’s no reason to believe that tariffs will go away anytime soon. Either way, I think it’s worth buying in the face of such profound disruptions, even if it means walking right into an economic recession. At the end of the day, the stock market has already had more than enough chance to react negatively.
Whether it has overreacted is another question entirely. Either way, some stocks are already down more than 20% from their previous all-time highs. It’s these plays that are in bear markets of their own that investors may wish to put new money in.
Regarding the banks, tariffs are another headwind that has weighed down the group. Indeed, it has been tough to be a bank shareholder over these past five years. And while the future remains uncertain, I think the next five years could be a lot brighter now that valuations are depressed and expectations are somewhat muted.
The lagging bank stocks that could be worth buying
Though some of the lagging bank stocks may have been viewed as “dead money” by some, value investors, especially those seeking passive income, should be inclined to view the group as fantastic value stocks.
Sure, a recession would cause ripples to work their way through the Canadian bank stocks. But if you’re in the market for a great deal and want yield, I see few reasons to pass up the bank stocks today, especially the better deals within the cohort known as the Big Six.
Here’s one Canadian bank stock that could be a good bet despite the Trump trade war concerns which have built up in recent weeks and months.
National Bank of Canada
National Bank of Canada (TSX:NA) is the sixth-largest bank and number six of the so-called Big Six. Despite its smaller size, though, it has put up some pretty remarkable results in the past two years as shares surged to new highs. Though shares have more recently corrected around 15% from highs over Trump tariff jitters, I still think the stock is worth banking on. The stock yields 3.9% at the time of writing alongside a really low 10.8 times trailing price-to-earnings (P/E) multiple.
Now, the recent quarter may have been weighed down by higher credit costs and other expenses. However, National Bank is well-equipped to keep moving down a rocky road. As rates come down, perhaps the smallest of the six Canadian banks could have the means to get a jolt as it moves forward with its expansion beyond Quebec.
I’m a big fan of the name and wouldn’t sleep on the opportunity to pick up a few shares at below $120 per share. Of course, no bank stock is safe should a recession loom. Either way, I think National Bank’s resilience is heavily discounted by the market right here.
