Don’t look now, but it’s off to the races again for the TSX Index, which is flirting with new all-time highs. Led higher by the broader recovery in U.S. market indices, the TSX certainly looks to be in good shape as it moves on from a few years of relative stagnation.
Undoubtedly, just because the stock market is doing well does not mean Canada’s economy is in the clear. Still, many pundits agree that the Bank of Canada may be closer to cutter interest rates than the U.S. Federal Reserve. Inflation certainly does not seem to be tame, at least when you head on over to the local retailer or grocery store.
That said, the rate of price increases has come down quite a bit in recent quarters, even if we’re still feeling the pain from the last two years of elevated inflation. Undoubtedly, just because the pace of price hikes is slowing does not mean the days of 2019-20 prices are going to return. Until there’s some sort of deflation (that’s negative inflation in which prices fall), such prices may never return.
In short, slowing inflation is less likely to be felt after a prolonged period of inflation. Deflation would cause the perception that inflation is under control.
The battle with inflation has been rough on consumers
With a Bank of Canada that’s probably fine cutting interest rates when inflation returns to the 2% range, though, it’s hard to tell if the stage could be set for such a scenario. And as wage increases in response to inflation begin to set in, there may be no looking back to the great pre-pandemic, pre-inflation prices that we all have longed for.
Further, just because deflation would be appreciated at the local grocer doesn’t mean it’s necessarily good for the economy’s long-term future. In the meantime, though, deflation seems to be far less horrid than inflation.
Personally, I think the rise of artificial intelligence (AI) could pave the way for deflation at some point down the road. However, until AI really starts to earnings considerable cash flows for firms, 2% inflation (what we’re used to) is likely to become the norm again. For now, consumers will need to live with the scars of inflation, which may take a heck of a lot longer to get used to.
In any case, here’s one TSX stock that’s been a great friend to Canadian consumers (and investors) amid inflation and will likely continue to be for many years to come.
Dollarama: Bang for your buck as inflation’s scars linger
Enter Dollarama (TSX:DOL), a discount retailer that continues to offer great bargains for those seeking great deals and a means to dodge the blow of inflation.
As mentioned previously, inflation has winded down quite a bit of late. However, the scars of inflation will continue to be sore for many consumers over the medium term. What does that mean for the top discount retailer in Canada? Good business over the foreseeable future as the firm looks to expand its footprint and probably continue gains for investors, especially those with DOL stock in their Tax-Free Savings Accounts (TFSAs)!
Dollar stores seem to be a dime a dozen (forgive the pun) in the U.S. market. To truly stand out, a discount retailer needs to be well-run, with some of the best supply-side deals out there. That’s what helps a retailer offer consumers bang for their buck.
As it’s one of the best-managed discount retailers, I continue to view DOL stock as a great buy as it continues its run to new highs. At writing, shares are at new heights, and they’re still a buy. TFSA investors, take notice!
