Image source: Getty Images.
New RRSP investors shouldn’t worry about the recent barrage of volatility. Whether or not the latest relief rally was just another short-lived bull trap is anyone’s guess. Either way, RRSP investors should focus on the only time horizon that matters: the long term. As interest rate hikes kick in, the economy is bound to pull the brakes. How hard the brakes will be pulled remains a giant question mark. In any case, the consumer may not be as fragile as the most bearish people on the street are led to believe.
While we’ve heard a lot about hiring freezes and canceled job openings lately, most of this news has come from the struggling tech sector. Additionally, the majority of businesses are still struggling to hire enough workers to carry out their day-to-day operations. It is this concentration of pain in the tech sector and the difficulty in retaining talent that could very well help us avoid a hard landing, as the central bank continues to raise the bar on interest rates.
In short, it may take more than rate hikes to rein in inflation to derail this consumer. However, their change in spending habits in response to high inflation is remarkable. In this article, we’ll take a look at two resilient Canadian stocks that I believe can propel an upcoming period of economic gloom en route to the next bull market.
Quality businesses at great prices
The outlook may look bleak today, but as you may know, things can change quickly. And markets will surely reflect better-than-expected quarterly results as we navigate another earnings season.
Companies like Spin Master (TSX: TOY) and International restaurant brands (TSX:QSR)(NYSE:QSR) are prime examples of quality companies that can continue to “swim” forward even as the economic tides turn against them.
Spin Master is a toymaker that has really made a splash in the digital game industry over the years. While Spin Master remains a traditional toy company, rather than a games company, I think the digital segment’s pandemic-era triple-digit growth numbers are hard to ignore. Indeed, Spin Master has compelling brands that translate well into the video and gaming realms.
Paw Patrol, Hatchimals and a wide range of other iconic brands will help Spin weather a recession without taking undue damage. Indeed, the holiday season is when Spin shines brightest. If consumer sentiment slows further, chances are Spin will miss the mark. In any case, the profit bar is already quite low and the company is more than capable of delivering a few successful products that may allow Spin to take a bit of a share from its rivals.
International restaurant brands
Restaurant Brands International is one fast food company that could see sales remain strong as we enter a mild recession or economic downturn. Fast food items tend to see steady demand as consumers begin to tighten their budgets. In an environment of high inflation and macroeconomic uncertainties, consumers can find comfort with value menus at restaurants like Burger King or Tim Hortons.
With a yield north of 4% and a balance sheet that leaves room for more M&A, it’s hard to be bearish on the name, even if you think the second half will be as treacherous as the first.