The Best Recession Proof Canadian Stocks To Watch In 2021

The global stock markets have rallied over the past year, despite the world being grappled with one of the worst healthcare crises in human history. The Canadian stock market is no exception. S&P/ TSX Composite, the largest benchmark index in Canada, gained 56.04% since the stock market crash on March 23, 2020, following the news of a nationwide lockdown. The index has registered 3.6% gains year-to-date (as of February 26, 2021), 160 basis points higher than the S&P 500’s 2% returns over the same period.  

The bullish market trends paint a different picture compared to the real macroeconomic situation, indicating an apparent stock market disconnect. According to preliminary estimates, the Canadian economy witnessed its largest contraction on record in 2020, with GDP falling 5.1% year-over-year.  The country has been recovering slowly since November last year, primarily driven by the reviving demand for crude oil. However, the current weakness of greenback reserve currency providing a competitive advantage to the United States and ongoing clean energy drive is expected to be major headwinds for Canadian economy recovery in the near future. As a result, the International Monetary Fund slashed the country’s GDP growth projection from 5.2% to 3.6% in 2020.  

Against this backdrop, the current rally seems unsustainable, and a market correction is long overdue.  The rise in 10-year US treasury yields appears to have kickstarted the projected decline, as global equity markets have declined since the benchmark bond yields hit their 1-year high three days ago. S&P/TSX Composite has declined 2.5% since then, while S&P 500 lost 2.9% since the onset of the equity sell-off. 

It is usual for markets to decline by a margin of 10% or more during a correction. Markets are expected to fall further over the next couple of days as the ongoing equity sell-offs intensify. Thus, investing in recession-proof stocks having a demonstrated history of sustainable performance during a market pullback can help you hedge your portfolio while maximizing return on investments.  

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Disclaimer: All the information in this article - is published in good faith and for general information purpose only. Hashtag Investing does not make any warranties about the completeness, ...

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