Trade tensions, geopolitical concerns, and the potential for increased rate hikes seem to be back and scarier than ever. With stocks coming off some Thursday turbulence, many investors wonder if it’s still worth buying into a market that looks like it could be set for a correction or maybe even something worse, like a mild bear market.
Any way you look at it, there’s no sense getting fearful, especially if you’re an investor who wants to build wealth over the years and decades, rather than looking to make a quick gain by the end of the summer.
With President Trump recently announcing a 50% tariff on Canadian products, there’s serious potential for inflation to get a huge second wind. Combined with higher oil prices due to the conflict in the Middle East, it feels like the second half could see the highest inflation in some time.
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More inflation coming?
That’s a horrifying thought, especially when you consider how many rate hikes might be needed to combat such price increases. What will convince the Bank of Canada to actually act rather than hold off?
Time will tell, but I do think that the threat of tariffs and higher transport costs means greater risks will arise from holding cash as inflation erodes its purchasing power. If anything, investing in defensive value stocks could be the move as new horrid forces look to pressure the Canadian economy.
We’ll have to wait and see whether a recession or stagflation becomes the new reality. Either way, though, I think it’s still a good time to invest, provided you prudently pick your investments. Here’s one name I’d be willing to hold onto through a second half that could see the markets give up some of the first half’s gains:
Dollarama
Dollarama (TSX: DOL) has to be one of the better inflation fighters out there. As the cost of living moves higher, the discount retailer is a great place to get more value from one’s eroding dollar. Indeed, we’ve seen quite a lot of belt-tightening when it comes to Canadian consumers.
Things could get even more severe as higher tariffs and oil prices look to weigh heavily on personal balance sheets. Dollarama is going to feel it as well, but, in my view, it can absorb the higher costs far better than most other retailers.
And, perhaps most importantly, it understands the value of offering value to take market share. As the firm leverages its bargaining power while improving operating efficiency, perhaps no firm could outmuscle Dollarama when things get really tough.
After a flat year, I think it’s time to get back in the name, as the firm looks to make the most of a bad situation for the Canadian consumer. The stock goes for 37.3 times trailing price-to-earnings (P/E), which seems like a fair price to pay for a firm that will be busy expanding and earning while most other firms, especially in discretionary retail, take a big hit to the chin.
