The current economic environment is a mixed bag of opportunities and uncertainties. On one side, the Bank of Canada is slashing interest rates to leave more money in the hands of consumers to boost spending. On the other side, Trump tariffs have made exports and imports expensive, fueling inflation. Many businesses have slowed their investment, and consumers have postponed their purchases, waiting for tariff wars to cool down and prices to normalize. In such an uncertain economic environment, how can you invest $15,000 and still make money?
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Where to deploy $15,000 in today’s economic environment
If Canada succeeds in removing the tariffs, it will present opportunities in energy and tech stocks. If tariffs are prolonged, the threat of inflation and economic slowdown may materialize, presenting an opportunity for defensive and alternative investments. You can deploy $7,000 in each scenario and $1,000 in gold to hedge against uncertainty. Let’s explore this in detail.
Investing in an economic environment where the tariff war eases
Energy stocks
Canada exports more than 90% of its oil produced. Its largest oil sands company, Canadian Natural Resources (TSX: CNQ), exports ~32% of its output to other North American and international markets. However, the company is not significantly impacted by the tariffs thanks to its diversified product mix of natural gas and synthetic crude oil.
Canadian Natural Resources navigates oil and gas price volatility by changing its product mix to realize higher prices and increasing production. Since it has high-output, low-maintenance reserves, it can produce more without significantly depleting reserves.
CNQ’s share price fell 20% in early April to around $36 when Trump’s retaliatory tariffs were imposed and then paused. Since then, the stock has recovered to $45, as the WTI crude oil price recovered from US$59 to US$67. CNQ can sustain its current dividend of $2.35 per share even if the WTI crude price falls to US$50/barrel. If the tariff war eases, the oil price could return to US$70/barrel, reviving CNQ’s cash flow and driving the stock price to around $50.
Tech stocks
Several tech stocks took a plunge over tariff uncertainty. Among them is Descartes Systems (TSX: DSG), whose share price fell 21% between February and early April when the U.S. imposed tariffs, but then revived and fell again 14.5% in early June to $135. The second dip came because it announced cost reduction initiatives in first-quarter earnings, as its customers face economic and global trade uncertainty.
Descartes has a net cash position of $176.4 million, which can help it sustain a short-term downturn. Its logistics and supply chain management solutions can tap the opportunity for trade recovery if the tariff war eases. Under this scenario, Descartes’ stock could rise by strong double digits and reach its 52-week high of around $178, representing a 32% upside. You could buy the stock at the dip to enjoy the recovery rally whenever it comes.
Investing in an economic environment where the tariff war is prolonged
If the opposite is true and the tariff war prolongs, inflation will creep in and shift consumer spending to essential items. That will bode well for Loblaw (TSX: L), which runs supermarkets, pharmacies, and apparel stores. Its profit margins will remain flat as the retailer will pass the tariff cost to customers. Higher volumes will drive sales and stock prices.
Loblaw stock has been moving in the opposite direction to the market. Its share price surged 20% between February and March when other stocks fell on tariff implementation. You could deploy some money in this stock to balance your portfolio returns if tariffs are prolonged and pull down oil and tech stocks.
Is now a good time to buy gold stocks?
Another defensive play is gold. Gold prices rise when paper currency falls or amid economic uncertainty. Gold is still the global medium of exchange. Central banks worldwide are building their gold reserves amid geopolitical tensions, creating increased demand for gold.
A good way to invest in gold is through the iShares Gold Bullion ETF (TSX: CGL). The ETF gives you exposure to pure gold bullion for a 0.5% management fee.
A $1,000 investment in the ETF a year back is now above $1,420 as market uncertainty drives gold prices. You could invest in the ETF to balance your portfolio’s volatility amid uncertainty.
