Passive-income investors shouldn’t let the recent wave of market volatility keep them on the sidelines. If anything, the market pressures have made the numerous TSX dividend dynamos that much more attractive from a long-term perspective.
Still, it’s never easy to invest amid bearish conditions.
Recession talk, rate hikes, and all the sort are never ideal. That said, when have things ever been perfect for investors?
Remember, there will always be risks to consider. Arguably, when perceived risks are low, it tends to be a riskier time to invest. It’s the risks not on the radar of everyday investors that tend to hurt markets most when they make a sudden appearance.
Whether we’re talking about the sudden failure of SVB Financial (or Silicon Valley Bank), or the COVID-19 pandemic, investors must always be ready for the unforeseen. That way, they won’t be rattled and pressured to make a panic-driven investment decision.
Top Canadian dividend stocks to help you plow through a tough time
Looking ahead, the Fed is attempting to pad the economy’s landing at the hands of higher rates to the best of its ability. It’s not an easy task. To have tempered inflation and no (or a mild) recession is akin to having your cake and eating it, too.
That said, if anybody can get the job done, it’s Fed chairman Jerome Powell. Even Warren Buffett thinks the man has been terrific, given the dire circumstances. If he can navigate the ship through one of the most unprecedented times in market history (the COVID pandemic), he can conquer inflation without causing too much long-lasting damage.
Right now, a lot of investors seem doubtful that the Fed can accomplish its mission without causing something to break. Silicon Valley Bank already “broke” due to higher interest rates due to its overextended bond portfolio. It was a scary time to be an investor back in March, especially for those heavy in the bank stocks.
The good news is that bank failures can have a disinflationary effect on the economy. Combined with rate hikes and AI innovation, I do not think it’s far-fetched to look at deflation as the next big threat. Indeed, after a few years of surging prices, deflation does not seem like a bad thing. In any case, it’ll be interesting to see how things unfold, as the Fed tries to land the economy smoothly.
Dividend dynamos like Scotiabank (TSX:BNS) look enticing here, as bank fears fade.
Scotiabank is a Big Six bank that doesn’t get as much credit as its bigger brothers. It’s Canada’s internationally focused bank, which is perceived as a negative when times get tough.
Indeed, emerging markets are a choppier ride. However, the turbulence is made up for in terms of above-average, longer-term growth prospects. Despite the recession, pandemic, and wave of global volatility, I remain a fan of emerging markets for young investors who seek to do better than the averages.
Here at the Motley Fool, we all strive to do better. And in terms of bank stocks, I believe Scotiabank ought to be a preferred bank stock for those seeking prudent management in international (Latin America) markets.
Yes, operating in such a market can be tricky, but Scotiabank has the talent to manage risks very effectively. Today, shares are in a bear market, down around 26% from the top. If you’re committed to invest for +10 years, I’d argue the dip is worth buying. The stock boasts a massive 6% dividend yield alongside a modest 9.54 times trailing price-to-earnings multiple.
Sure, Scotiabank will be a choppy ride through the year. But it’s one worth riding if you’ve got the stomach.