Following a revised 1% decline in GDP in the fourth quarter of 2025, Canada’s real GDP contracted at an annualized rate of 0.1% in the first quarter of 2026, meaning the economy has slipped into a technical recession. This does not mean investors need to panic, but it does suggest that as households and businesses begin to exercise caution, investors may want to hold companies capable of sustaining profitability.
When gross domestic product (GDP) contracts, investors typically flock to safe-haven assets, and the key is to act before this rush becomes obvious.
In such a contracting environment, Metro (TSX:MRU) and Intact Financial (TSX:IFC) fit the bill. When the economy shrinks, seemingly “boring” businesses become attractive—especially those that are still growing, paying dividends, and meeting needs that Canadians cannot easily give up.
Consumers can postpone vacations, new furniture purchases, or car upgrades, but they cannot delay buying groceries, medication, or essential household items for long. Metro operates grocery stores such as Metro and Food Basics, as well as pharmacies including Jean Coutu and Brunet, forming a defensive combination covering both food and health.
The latest quarterly earnings show steady execution. Metro reported second-quarter fiscal 2026 sales of $5.1 billion Canadian, up 4.1% year-over-year. Same-store food sales rose 1.8%, while same-store pharmacy sales increased 5.1%. Adjusted diluted earnings per share (EPS) grew 8.8% to $1.11 Canadian.
The risk lies in valuation. When investors rush into safe assets, defensive stocks can become expensive. Labor pressures, theft, food inflation, and margin pressures may also pose challenges. Metro is unlikely to double overnight, but if the market starts seeking recession-resistant stocks, this stock could quickly go from dull to in demand.
Intact Financial offers another defensive option. It is Canada’s largest property and casualty insurer, covering auto, home, commercial, and specialty insurance lines. When the economy slows, people still need insurance. In some cases, premiums may even rise as repair costs, weather-related disasters, and replacement values increase.
This makes Intact a strong choice before investors have fully priced in economic weakness. It does not rely on consumers buying more goods every week, but rather on accurate risk pricing, collecting premiums, investing float, and controlling claims.
First-quarter 2026 results were strong. Net operating income (NOI) per share rose 8% to $4.33 Canadian. The combined ratio was 91.3%, meaning the company still generated an underwriting profit. Book value per share increased 13% year-over-year to $108.78 Canadian. These numbers demonstrate operational discipline, not just growth.
Risks exist as well. Extreme weather can strain claims, auto insurance remains politically sensitive, competition may pressure pricing, and after a strong run, Intact’s stock does not look cheap. However, when everyone wants insurance protection, quality assets are rarely sold at clearance prices.
