Could a Recession Hit Canada? 2 TSX Stocks to Consider

Canada doesn’t look like it’s falling off a cliff. Yet the economy looks slower, pricier, and more fragile than it did a few years ago. The Bank of Canada expects moderate growth as the country adjusts to U.S. tariffs, while Ottawa’s spring update points to private-sector forecasts of just 1.1% real gross domestic product growth in 2026. That’s not a disaster, but it doesn’t leave much room for error if consumers pull back, oil shocks linger, or trade tensions get worse.

That’s where defensive TSX stocks can earn a place on a watch list. They won’t make a recession painless, and can still fall if the market sells off. Yet some businesses sell what people keep buying, while others collect premiums and fees from long-term financial needs. Metro (TSX: MRU) and Great-West Lifeco (TSX: GWO) fit that idea in different ways. Together, they give investors something useful: exposure to basic household spending and long-range financial planning, rather than just another bet on a booming economy.

MRU

Metro shows grocery demand doesn’t disappear when households tighten budgets. People may trade down, skip restaurant meals, and watch flyers more closely. Yet they still need food, pharmacy products, and everyday essentials. Metro operates grocery banners such as Metro, Super C, Food Basics, Adonis, and Jean Coutu pharmacies. That mix gives it exposure to both discount shopping and steady pharmacy traffic.

Its latest quarter showed why investors often view this stock as a defensive compounder. In the second quarter of fiscal 2026, Metro’s sales rose 4.1% to $5.1 billion, while adjusted earnings per share (EPS) climbed 8.8% to $1.11. Those aren’t surging numbers, but steadier ones, and steadiness can look pretty attractive when recession fears rise.

Metro also gives investors a modest dividend, recently yielding about 1.8%, with a quarterly payout of $0.4075. The payout ratio leaves room for reinvestment, buybacks, and future dividend increases. The catch is valuation. Metro trades around 19 times trailing earnings, so investors don’t exactly get a bargain. Labour costs, food inflation, theft, and competition can also pressure margins. Still, if Canada slows, Metro’s basic business should hold up better than many cyclical names.

GWO

Great-West Lifeco brings a different kind of recession defence. It owns Canada Life and operates across insurance, retirement, wealth, and asset management. Those businesses don’t avoid economic cycles. Markets affect fee income, credit losses can rise, and lower rates can change investment returns. But life insurance and retirement savings remain long-term needs, not impulse buys.

The company’s latest results looked strong. In the first quarter of 2026, GWO stock reported double-digit growth, with base return on equity above 19%. Its Canada segment delivered $352 million in base earnings, up 11% from last year. GWO stock also reported EPS of $1.37, ahead of expectations, and investors now collect a forward dividend yield around 3.3%.

True, a 3%-plus yield won’t make anyone rich overnight, but it can soften the ride if the market gets choppy. GWO stock also lifted its dividend by 10% earlier this year after reporting record 2025 base earnings. That signals confidence, though investors should still respect the risks. GWO stock has already had a strong run, with a trailing price-to-earnings ratio near 17. That looks richer than its own longer-term average. A deeper recession could also hit markets, employment, group benefits, and wealth-management assets, so these are all points to watch moving forward.

Bottom line

So, could a recession hit Canada? Yes. A shallow one wouldn’t shock anyone in this environment. But investors don’t need to hide in cash and hope for the best. Metro offers everyday-demand resilience, and GWO stock offers exposure to long-term insurance and retirement needs. All while collecting some income even with $7,000.

Neither stock looks risk free. Yet both could help investors stay invested if Canada’s economy gets colder. That’s the first real opportunity: staying calm before everyone else starts to panic.