It’s the big question that I’m sure many Canadian investors are wondering: whether or not we’re in the midst of a bear market. Indeed, the Nasdaq 100 is in a bear market right now. The S&P 500 barely avoided one, as Trump hit the pause button on most tariffs. But with volatility continuing to work against investors, questions linger as to whether the bottom is in or if the S&P 500 is just experiencing another one of its temporary upward flucutations that will ultimately end with another nasty, painful sell-off.
It’s impossible to tell if we’re in an official bear market. Some watchers think that we are, in fact, in the early innings of a nasty bear market, one that could punish dip-buyers who get too greedy at current levels. Indeed, deploying every last penny of your liquidity may not be the best idea in the world, even if a stock on your radar looks a bit too cheap to pass up. In bear markets, cheap stocks could get marked down to become even cheaper.
And if a recession actually materializes, stocks may not be as cheap as they seem. At the same time, if no official bear market (that’s a 20% decline from peak to trough) even happens, stocks could prove incredibly timely at this juncture. But unless you’ve got Donald Trump on speed dial, it’s impossible to know whether markets will move higher or lower from here. Either way, one has to think that the negativity in stocks is starting to get to Trump. If he’s not rattled, perhaps some folks within his administration may be.
In any case, it’s hard to imagine things getting any uncertain from here, with a massive trade war with China and the potential for the pain to be postponed to midsummer when the 90-day tariff pause expires. In any case, the following dividend stocks look like buys, regardless.
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Fortis
Fortis (TSX:FTS) stock is one of the ultimate defensive dividend plays. As a highly regulated utility with a durable cash flow stream that can shine even when a bear market comes for the TSX Index, Fortis stands out as a fantastic volatility shelter. The stock recently hit a new all-time high after spending most of the last few years in a bit of a trough.
At 19.9 times trailing price to earnings (P/E), with a 3.81% dividend yield, shares still look too cheap and bountiful, especially if tariffs cause a volatility storm in July. At this juncture, you’ve got to pay a premium for certainty. And when it comes to Fortis, which has a very predictable cash flow stream and dividend-growth profile, I simply don’t see such a premium attached. At $65 and change, I’m a fan of the name as it powers slow and steady growth over time.
Fairfax Financial Holdings
Fairfax Financial Holdings (TSX:FFH) has held up rather well of late, now in the midst of a consolidation channel just north of $2,000 per share. Indeed, the sideways correction could persist for some time. Either way, the stock’s cheap at 8.94 times trailing P/E.
And with a 1.1% dividend yield and a recent history of crushing the TSX Index (and S&P 500), I’d not sleep on Prem Watsa’s firm. As stocks plunge and valuations come in, my guess is Watsa’s job as a value investor will become that much easier as he uncovers new bargains at a time when most others are running scared. Also, with a 0.57 beta, the insurer and investment holding firm looks rock solid in the face of TSX turbulence.
