October numbers for the consumer price index (CPI) are in, and it’s good – no, great – news. Inflation fell another 0.1% month over month, bringing it down to 3.1% year over year. This means the economy seems to be slowly but surely getting back to normal. What’s more, it could mean interest rate hikes could not just be over, but lowering.
Yet, there is some bad news. There could soon be an end to this bear market. Yes, really, that’s bad news. At least for investors looking to get a deal that’s going to really help them gain back returns during a bull market.
Embrace the chaos
There’s a popular saying by Warren Buffett to be greedy when others are fearful, and fearful when others are greedy. Now that the market is starting to get back to normal, it’s the perfect time to get greedy. And I do mean perfect. That’s because the market is slowly but surely starting to turn. When it turns and doesn’t come back, you’ll be hoping you got the best deal imaginable.
That’s why now is the time for Canadian investors to seek out the best stocks that are going to deliver right after the bear market is over. Therefore, it’s time to seek out companies that you’re going to want to hold long term. Those that are likely to be some of the first to recover, and some of the last to drop.
So now, let’s look at some stocks that fall into this category – companies that certainly suffered during the last few years, but are due to recover strong in a bull market. Yet, there is now less time to get in while you can.
Bank stocks
One of the best choices you can make for your portfolio right now is bank stocks. The volatility in the market, higher inflation, and interest rates has been hard on bank stocks. These financial institutions have had to use their provisions for loan losses, and it has eaten away at their bottom line.
Yet, because of these provisions, bank stocks are set to recover strong coming out of the bear market. That’s especially the case in Canada, where we enjoy an oligopoly of banks. There isn’t a lot of competition, which means banks can collect cash to help them through these rough times.
So if you’re going to pick any, I would consider Bank of Montreal (TSX:BMO) at this stage. BMO stock was one of the last banks to get in on large foreign investment in the United States before they closed the door on that. Now, it has an expanded variety of locations from its Bank of the West purchase. Further, shares are still down 15% in the last year! Meanwhile you can pick up a 5.27% dividend yield if you buy today.
Consumer discretionary
Another area set to grow are consumer discretionary stocks. These are companies that offer not just the essentials, but a bit more. And honestly, the holidays are upon us. So these companies are likely set to surge if we go through the holidays right as a bear market is ending.
So instead of seeking out stocks that offer discounts, consider those that have done well during a bull market. Companies that offer a variety of products that aren’t necessary, but perhaps less pricey than some of the larger institutions out there.
For instance, I would certainly consider Canadian Tire Corporation (TSX:CTC.A) at this stage. The stock has been falling as consumers have gone elsewhere at a time when they don’t need its products. However, as the market recovers and holidays come, Canadian Tire stock is likely to see an increase in sales from its many locations, other brands, and auto department. Yet right now, it trades flat to the same time last year, with a 4.75% dividend yield to boot. Consider these bear market stocks then, and you’ll soar out of this downturn.
