In this current market environment, investors are right to be concerned about where equities could be headed moving forward. For Canadian investors, these risks are perhaps ultra-intensified, with tariff policy shifting on a seemingly daily basis from the Trump administration and the potential impact on Canadian companies still relatively unknown.
In such an environment, investors may benefit from focusing more of their attention on much more defensive sectors. The good news is that there are plenty of such value opportunities in the Canadian market.
Here are two of the hottest sectors I think Canadian investors would do well to focus on this year.
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Gold
Many investors seem to like the yellow metal more than the villain in Goldfinger, at least from a financial perspective, right now.
The price of gold has continued to hover around its all-time high seen this month (about $20 off its all-time high of nearly $3,060 per ounce). Investors are clearly looking for a safe-harbour investment in this environment. Accordingly, it should be no surprise that as recession fears pick up, demand for gold continues to intensify.
There are some investors out there who may think this rally can’t or won’t continue. Indeed, in previous downturns, gold often had a negative initial response to the realization that a recession was underway, as investors rushed en masse to sell anything liquid. That could be the near-term case for gold and gold miners moving forward.
But for investors looking for portfolio stability and long-term growth potential, I think certain gold miners are the best way to play the yellow metal, at least for now. Companies like Agnico Eagle (TSX: AEM) provide excellent leverage to the price of gold and can outperform even in much lower gold price environments. So, even if gold prices dip from here, this is one of those long-term holdings I think is worth adding for portfolio stability (and capital appreciation) over the long term.
Bonds
The bond market is one that can provide some investors with glazed-over eyes. There’s a good reason for this. Fixed-income securities like bonds are much more difficult for the average person to trade and often carry higher minimum investment thresholds that preclude some from investing in this asset class.
However, with the financialization of our markets, we’ve also come up with plenty of bond ETFs and funds that provide exposure to specific bond types and durations across the curve. This means that investors who may have been on the outside looking in previously now have the ability to invest in this space and diversify their portfolios further.
There are plenty of younger investors out there who may want to remain almost entirely exposed to equities, at least for the foreseeable future. That makes sense, and an aggressive investing strategy is worthwhile, particularly for investors who have time on their side.
But for those nearing or in retirement, risking capital losses can derail one’s ability to have enough set aside to comfortably retire. For such investors (and younger investors seeking greater stability right now), I think bonds are an overlooked space that should get more attention than they do. Hey, who wouldn’t want a guaranteed 4% per year from the U.S. government over the next decade if we could be headed into another “lost decade” in the equity markets?
