There’s been a bit of a sentiment shift in the broad stock markets over the past couple of weeks, with the S&P 500 down close to 3.5%, and the Nasdaq 100 down nearly 5% from its own peak. Meanwhile, the TSX Index is off 2.5%, as the major index falls back into its consolidation channel after enjoying a brief, albeit short-lived, breakout back in the first half of November.
Indeed, the tougher sledding in November has made it tough to be a dip-buyer, especially with some vocal bears announcing bearish bets against some notable mega-cap tech stars. With talks of some sort of “AI bubble” all year and some major money managers taking a profit on some of their winning tech positions, while other major money managers go as far as to place bearish bets (think put options or shorts), it seems like a good time to get out.
While I do think it’s a scary time to be a dip-buyer, tuning out the overly bearish commentary might be the way to go because, at the end of the day, it’s the long term that we should be thinking more about, and not whether the Federal Reserve will cut rates by a quarter percentage point in the next month. Over the near term, anything can happen, including a correction or even a bit of a crash in some of the overheated AI stocks.
Ready for more stock market volatility?
But if you’re prepared for such volatility with a part of your TFSA (or other accounts) allocated to some of the more defensive names, I think the roller coaster ride is worth staying on as you seek value plays to scoop up on the way down. Whenever fear is the main sentiment on Wall Street and there’s a rush to safety, Mr. Market might make some pricing mistakes to the downside, marking down beloved businesses with strong fundamentals and growth stories by a bit too much.
So, if we are destined for more sales to end the month of November, perhaps the sales to be had from Black Friday 2025 will also apply to stocks!
Right now, it’s the go-go growth stocks that look a bit toppy. And while there could be more downside in the cards for the next couple of months, I’d look to start thinking about buying on weakness, especially if you don’t buy that AI is a bubble and the technology won’t lead to the economy enjoying a productivity boost over the long run.
Hydro One stock: A great way to play defence
If you’re like many investors who are overweight tech and underweight defensives, a name like Hydro One (TSX:H), I think, is a fantastic bet alongside the likes of shorter-duration bond funds. Amid volatility, shares of H are at fresh all-time highs, and while the dividend yield is now slightly less than 2.5% with a trailing price-to-earnings (P/E) ratio that’s close to 25 times, I find the defensive utility is still worth backing, especially after a solid third-quarter result that saw profits march higher.
With shares of the electric transmission play up more than 22% year to date, the market beater might also be the one that helps you stay afloat should the year-end sell-off be wilder from here. With a 0.31 beta and a cash flow stream that couldn’t be rattled by such near-term jitters, it may be time to pick up a few shares of the name if you’re not yet ready to ride out the latest rough patch in the markets.
