Bloomberg now expects 2023 to be one of the worst years for the world economy since 1993. But don't panic — here are 3 stocks to help protect you from the pain | Canada News Media
Bloomberg now expects 2023 to be one of the worst years for the world economy since 1993. But don’t panic — here are 3 stocks to help protect you from the pain
Bloomberg now expects 2023 to be one of the worst years for the world economy since 1993. But don’t panic — here are 3 stocks to help protect you from the pain
The world economy has largely bounced back from the COVID-19 pandemic, but dark times could lie ahead according to Bloomberg.
Economist Scott Johnson at Bloomberg Economics forecasts that the world economy will grow 2.4% in 2023, marking a slowdown from the 3.2% growth expected for this year. 2.4% would be the slowest growth since 1993 — except for the crisis years of 2009 and 2020.
His analysis also shows the U.S. economy entering a recession at the end of 2023. For the euro area, a recession is expected at the start of the year.
“In the US, with wage gains set to keep inflation above target, we think the Fed is headed toward a terminal rate of 5%, and will stay there till 1Q24,” Johnson writes. “In the euro area, meanwhile, a more rapid decline in inflation will mean a lower terminal rate and the possibility of cuts at the end of 2023.”
The prospect of a recession does not bode well for stocks. U.S. GDP demonstrated growth in Q3 and the S&P 500 is still down 19% year-to-date.
Of course, some businesses are more resilient than others. Here’s a look at three companies capable of making money through thick and thin. Wall Street also sees significant upside in this trio.
Don’t miss
Southern Co
Southern (NYSE:SO) is a gas and electric utility holding company headquartered in Atlanta. It serves about nine million customers.
The utility sector is known for being a defensive play. No matter how many times the Fed raises interest rates — and how bad next year turns out to be — people still need to heat their homes in the winter and turn the lights on at night.
The recession-proof nature of the business also means Southern can pay reliable dividends.
In April, the company boosted its quarterly payout by 2 cents per share to 68 cents per share, marking the 21st consecutive year that Southern has increased its dividend.
Look further back, and you’ll see that the company has paid steady or increasing dividends since 1948.
In the first nine months of 2022, Southern earned an adjusted profit of $3.35 per share, up 9.8% from the same period last year.
Last Wednesday, Wells Fargo analyst Neil Kalton raised his price target on Southern from $70 to $77. While he kept an Equal Weight rating on the shares, the new price target implies a potential upside of 11%.
Kroger
The economy moves in cycles, but people always need to shop for food. As a result, Kroger (NYSE:KR) can make money through our economy’s ups and downs.
That’s one of the reasons why in an era where physical stores are under serious threat from online merchants, Kroger remains a brick-and-mortar beast.
The company has expanded its online presence, too. Kroger’s digital sales in 2021 clocked in 113% higher compared to two years ago.
You can see Kroger’s resilience in its dividend history: the company has increased its payout to shareholders for 16 consecutive years.
Evercore ISI analyst Michael Montani recently upgraded Kroger from ‘in line’ to ‘outperform’ with a price target of $56 — implying a potential upside of 26% from where the stock sits today.
Coca-Cola
Let’s round out the list with Coca-Cola (NYSE:KO) — a classic example of a recession-resistant business. Whether the economy is booming or struggling, a can of Coke is affordable for most people.
The company’s entrenched market position, massive scale, and portfolio of iconic brands — including names like Sprite, Fresca, Dasani and Smartwater — give it plenty of pricing power.
Add solid geographic diversification — its products are sold in more than 200 countries and territories around the globe — and it’s clear that Coca-Cola can thrive under all circumstances. After all, the company went public more than 100 years ago.
More impressively, Coca-Cola has increased its dividend for 60 consecutive years. The stock currently yields 2.8%.
UBS analyst Peter Grom has a ‘buy’ rating on Coca-Cola and a price target of $68 — roughly 9% above where the stock sits today.
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OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.
She says the changes will come into force in December and better reflect the housing market.
The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.
Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.
Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.
The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.
The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.
The increase followed a 1.7 per cent decrease in June.
The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.
Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.
Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.
In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
