Stock Market Correction: Could There Be a Third Wave of Coronavirus Next Fall?

Although much of the market is focused on the recovery, some experts warn we could see a third wave in the fall meaning another potential market correction.

| More on:

As we finally start to turn the corner of the second wave, vaccinations are starting to pick up steam, and the stock market has avoided a second correction. There is strong hope we can finally start to put the pandemic behind us.

So it’s not surprising that nobody will want to hear or even think about the potential for a third wave by next fall.

But with many hoping for a recovery by the second half of 2021, it’s important to weigh the probability of what might happen logically. We can all be optimistic the world will recover from this as quickly as possible. And in many ways, with the rapid development of highly effective vaccines, we’ve done a pretty solid job.

Going forward, though, as much as we can be optimistic, we must also be pragmatic. That means understanding that there are still several major headwinds we face before returning to any type of long-term normality.

Risks that could lead to a market correction

First off, while there are several positives to take away from the development of multiple vaccines, there are still many uncertainties here and around the world. Uncertainty is never good, and it’s what can easily precede a market correction, so it’s crucial to monitor the global developments about the pandemic.

Right now, vaccine complications continue to get resolved. What’s currently far more problematic are the issues arising when you consider the rapid spread of new, seeming more transmissible variants.

Experts are now warning that if we struggle to get enough people vaccinated and these new variants spread all throughout the summer, a third wave is highly likely in the fall. And while it may not be that bad, if it delays a permanent reopening that so many are counting on, there could be some serious negative consequences, including another market correction.

Like I said before, though, we are only just beginning February, so a third wave in the fall is a long way off. However, it’s important to keep it in the back of your mind throughout the rest of the year. That way, you aren’t caught off guard if the economy doesn’t recover the way everyone’s hoping for.

Investors should be careful with the amount of risk they’re taking on. You can bet on a recovery in 2021, but I would still be cognizant it may not work out.

At the same time, I would also be holding onto your recession-proof stocks. These stocks have underperformed lately as investors have been dumping them for higher growth stocks and businesses with recovery potential.

It’s a little premature to be abandoning these stocks, though, in my view.

A top recession-proof stock to buy if you’re worried about a market correction

If you’re looking for a great long-term investment that will protect your capital in the short-run during these uncertain times, the North West Company (TSX:NWC) is an ideal choice.

North West owns grocery stores and supermarkets in remote communities in Northern Canada as well as Alaska. It also operates supermarkets in the Caribbean, making up about 20% of its business.

Consumer defensive stocks like North West are ideal for protecting your capital because people need their essentials even in the worst economic environments. However, North West doesn’t just protect investors from a market correction.

It’s also well positioned to grow shareholder value substantially. The company has been integrating and strengthening all aspects of its business. And because it has minimal competitors in these remote regions, North West has a tonne of potential going forward.

It’s also been growing its market share through the pandemic. Smaller, non-essential stores have had to close, meaning more shoppers are turning to North West’s supermarkets to buy their big-ticket goods. This is just another bonus and why the stock will not only protects your capital today but can grow your investment for years.

Bottom line

North West is an incredible investment. It’s low risk, has a tonne of potential, and it’s a Dividend aristocrat. That’s why the stock is a buy today. Because whether or not the market corrects again, it will be a top long-term performer.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Daniel Da Costa owns shares of THE NORTH WEST COMPANY INC.

More on Investing

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Emerging Canadian AI Companies With Big Potential

These tech stocks are paving the way to an AI-filled future, but still offer enough growth ahead for a strong…

Read more »

Young Boy with Jet Pack Dreams of Flying
Tech Stocks

Is Constellation Software Stock a Buy, Sell, or Hold for 2025?

CSU stock has long been a strong option for high growth, high value stocks. But are there now too many…

Read more »

rising arrow with flames
Investing

2 Riskier Stocks With High Potential for Canadian Investors in November

Risky stocks such as Well Health Technologies have the potential to provide life-changing long-term returns.

Read more »

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold Forever

Here are 2 TFSA-worthy Canadian stocks. Which one is a good buy for your TFSA today?

Read more »

Canada day banner background design of flag
Investing

Got $500? 5 Top Canadian Stocks to Buy and Hold

These top Canadian stocks have solid fundamentals with potential to outperform the benchmark index by a wide margin.

Read more »

man touches brain to show a good idea
Energy Stocks

1 No-Brainer Energy Stock to Buy With $500 Right Now

Should you buy a cyclical energy stock at its decade-high? Probably not. But read this before you make a decision.

Read more »

Asset Management
Stocks for Beginners

TFSA: 4 Canadian Stocks to Buy and Hold Forever

Thinking about what to buy with the new TFSA contribution space in 2025? These four Canadian stocks are worth holding…

Read more »