With the broader markets sinking lower on Wednesday’s session ahead of a Trump auto tariff announcement, the fate of the relief rally is in question. Undoubtedly, the tariff-fueled market spill may not be over yet, and with many retail investors rotating into safer (think the utility stocks and consumer staples) assets, perhaps it’s not too outlandish to think that a bear market for the S&P 500 could be approaching.
Indeed, if a full-blown recession is coming for the U.S. and Canada, the bear could certainly come out of hiding once again. However, if tariffs go away and the U.S. economy is able to steer clear of an economic downturn, we could find ourselves right back at new highs. Indeed, things couldn’t be more uncertain, but now doesn’t stand out as a good time to be a net seller of assets, especially if you’re a decade or more away from your retirement date. Of course, riding out the waves to come is easier said than done.
And while there are still great bargains to be had today, I’d be an incremental buyer rather than being overly greedy and putting every dollar of cash to work right here, given the potential downside risks that could be ahead if a worst-case outcome actually comes to fruition and the Trump tariffs keep piling up over the months and quarters ahead.
Either way, here are some retail stalwarts that could help steady the ship. After fluctuating in recent weeks, shares also look to offer an attractive discount.
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Walmart
It’s hard to believe that a dominant, high-quality consumer staple like Walmart (NYSE:WMT) would be down 19% from its all-time highs. Indeed, after the latest correction in the S&P 500, the retail behemoth is just one really bad day away from entering its very own bear market. Of course, with a 0.54 beta, the stock should have held its own just a bit better than the broader markets. And while I view Walmart as well-equipped to ride out a bear-case scenario (and potential stagflation in the U.S.), I attribute the latest amplified slide primarily to the overextended valuation.
Indeed, even after falling close to 20%, shares of WMT trade at 35.4 times trailing price to earnings (P/E) — that’s still absurdly expensive, in my book, even with its unique competitive advantages. In any case, expect Walmart to be a less choppy way to ride out the rest of the market selloff as consumer sentiment sinks and traffic to the local Walmart increases. At the end of the day, it’s tough to compete against Walmart on price. And that, I believe, will help it sail smoother if tariffs tank the economy.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) stock is also flirting with a bear market, now down just shy of 20% from its all-time highs. Indeed, the name seems to be sinking for no real good reason. If shares plunge back to 52-week lows, investors will effectively get the latest strong quarterly result “for free.” And at 17.8 times trailing P/E, I view the long-term earnings grower as absurdly discounted by the market. There’s more to Couche-Tard than the proposed 7-Eleven deal.
With a 0.88 beta and a robust, growing 1.1% dividend yield, now may be the time to take advantage of the recent slide in shares. At the end of the day, Couche-Tard is the king of convenience, and until that changes, investors should be ready to buy further dips in shares.
