Concerns over the stock market’s outlook are well-justified in the current market environment. For Canadian investors, risks could be further amplified. The unpredictability of the Trump administration’s shifting tariff policies continues to pose a hard-to-quantify threat to Canadian businesses. Against this backdrop, shifting to more defensive investment options may prove to be a wiser choice, and the Canadian market offers just such opportunities for investors.
As we brace for a tumultuous market in 2025, these two types of assets may provide investors with an essential “safety cushion.”
Although gold prices have recently been trading near historical highs (at one point this month reaching $3,060 per ounce, before retreating by only about $20), the market’s demand for gold as a safe-haven asset continues to heat up. This appeal is particularly evident as fears of a recession intensify.
Some argue that this rally may be hard to sustain, citing historical trends that show investors often sell gold and other liquid assets early in a recession to generate cash, putting short-term pressure on gold prices. However, for investors seeking portfolio stability and long-term growth potential, selectively investing in gold mining stocks remains the best way to allocate to gold. Many Canadian gold stocks, even during periods of weak gold prices, have historically outperformed the broader market.
The bond market has often intimidated retail investors due to its historically complex nature and higher entry barriers. However, financial innovations have made participation in this market significantly easier. Bond ETFs and mutual funds now allow investors to access a diverse range of bonds with different maturities and types, effectively spreading risk.
For younger investors, aggressively allocating to equities might be a sensible strategy. However, those approaching or already in retirement cannot afford the risk of significant capital losses. At such times, bonds stand out with their stable income-generating characteristics. Even with the possibility of another “lost decade” for equities, U.S. government bonds offering an average annual return of 4% remain an attractive option.
In a market dominated by uncertainty, the defensive features of gold and bonds are being reappraised. For Canadian investors looking to balance risk and return, these two asset classes deserve close attention. Gold mining stocks provide long-term growth potential, while bond investments add stability to portfolios. Adjusting allocations effectively could be the key to investment success in 2025.
