From paycheque to panic: 5 ways to recession-proof your portfolio in Trump’s turbulent economy

You check your Tax-Free Savings Account (TFSA), and your heart drops. One day it’s up, the next day it’s free-falling. All because of a Trump trade comment or another rate warning. The economy’s flashing warning signs, and most Canadians are feeling it.

A recent survey by FP Canada found that 38% of Canadians say money is their biggest source of stress. It’s no wonder, with inflation lingering, interest rates still high and a continuing trade war.

Market volatility isn’t going anywhere. So, if we head towards a recession, what can Canadian investors do to recession-proof their portfolios?

What happens during a recession?

A recession is when a country’s economy shrinks for at least two quarters in a row. While recessions are part of a normal economic cycle, they’re still painful. The market tends to react before a recession even starts, and usually drops fast.

For example, when COVID-19 hit in early 2020, the S&P 500 plummeted 34% in just over a month. While it eventually rebounded, those who weren’t prepared took a hit.

Certain sectors tend to get hit hardest. Tech stocks, travel, luxury goods and anything considered “non-essential” can fall fast. Meanwhile, companies in sectors like utilities, consumer staples and healthcare often hold up better.

And then there’s the Trump effect. U.S. President Donald Trump continued his unpredictable trade policies, tariff threats and pressure on the U.S. Federal Reserve after returning to office. He remains heavy on protectionism and deregulation, and this adds extra uncertainty.

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Prepare your portfolio

If you want to protect yourself, now is the time to add strong, resilient companies. Ideally those with dividend income, steady earnings, and essential products.

• Loblaw Companies (L) is the grocery giant behind Loblaws, No Frills, Shoppers Drug Mart and more. It’s ideal as Canadians don’t stop buying groceries or prescriptions when the market turns sour. Loblaw has been growing steadily, with its most recent earnings showing $14.14 billion in revenue and an adjusted earnings per share (EPS) of $1.88. Even better? The company offers a dividend and reliable cash flow.
• Fortis Inc. (FTS) is one of Canada’s top regulated utility companies. It provides electricity and gas to customers across North America, and those revenues are locked in through regulation. That makes Fortis less sensitive to economic swings. It’s also a Dividend Aristocrat, increasing its dividend for 50 years in a row. Its latest quarter reported net earnings of $499 million, with long-term capital plans to grow its rate base and continue rewarding shareholders.
• Procter & Gamble (PG) isn’t Canadian, but it’s a U.S. consumer staples powerhouse that’s worth considering for diversification. It owns brands such as Tide, Pampers, Gillette and Crest. Products people keep buying no matter how tight their budgets get. In its most recent earnings report, P&G posted net sales of US$19.8 billion and organic growth of 2%. For Canadian investors, it’s also a good way to diversify geographically without taking on too much risk.

Related read: Best defensive stocks to invest in during a recession

Diversify like a recession-savvy investor

Owning good companies isn’t enough if your portfolio’s not diversified. One of the biggest mistakes investors make heading into a recession is investing in one sector, or even one country. You don’t need to overhaul everything, but should spread your risk.

Start by mixing dividend-paying stocks with safer assets like government bonds or guaranteed investments certificates (GICs). These don’t deliver flashy returns, but provide stability and income when equities are volatile. You can also consider real assets like real estate through REITs, or gold as hedges against inflation and uncertainty.

Related read: How to buy bonds

Exchange-traded funds (ETF) are another way to avoid picking individual companies that could end up in losses. Especially if you find a basic recession-ready mix offering about 40% in dividend stocks, 40% in fixed income and 20% in real assets or alternative investments. And if you’re investing through a TFSA, all your growth and income is sheltered from tax.

Related read: Best ETFs for Canadian investors

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Cut you risk, not your returns

If investors are still nervous, there are strategies to protect your portfolio without panic selling and ending up with losses. Instead, consider using stop-loss or limit orders, which automatically sell a stock if it drops below a set level to limit losses without watching the market daily. Rebalancing your portfolio quarterly to lock in gains, and avoid overexposure to one sector or country.

For income-focused investors, covered call ETFs offer a way to earn higher monthly payouts, even when prices are flat or falling. These funds write call options on their holdings, boosting income in sideways markets. And finally, aim for stability over high-volatility sectors like meme stocks, as these areas are usually the first to plummet during a panic sell.

Just remember: market dips come and go, but your investment plan should be built to last. A little preparation now can go a long way toward recession-proofing your future.

Sources

1. FP Canada: FP Canada™ 2025 Financial Stress Index reveals top financial stressors, barriers and generational differences

2. International Monetary Fund: Recession: When Bad Times Prevail

3. Loblaw Companies Limited: Loblaw Reports Revenue Growth of 4.1% and Adjusted Diluted Net Earnings Per Common Share Growth of 9.3% in the First Quarter

4. Fortis Inc.: Fortis Inc. Releases First Quarter 2025 Results

5. P&G.: P&G Announces Results for the Third Quarter of Fiscal Year 2025