5 stocks that could still thrive amidst uncertain monetary signals

These companies are better placed to see upside in an uncertain interest rate and currency environment

In “Central bank policies are diverging. Here’s where to invest now,” Bryan Borzykowski writes:

Mixed monetary policy makes asset allocation more challenging, especially as exchange rates fluctuate. When rates get cut, fixed income yields fall, causing bondholders to go looking for higher yields in other countries. That puts pressure on currencies, because bonds are mostly denominated in the local coinage. When international investors sell Canadian bonds, they’re effectively selling loonies too.

Here are five stocks that may see some upside from mixed monetary signals:

BlackRock Inc.

Chart showing 12-month trailing stock performance for BLK

P/E: 18.5
Yield: 2.5%
1-year total return (C$): 41%

The world’s largest asset manager should benefit from rate cuts, in part because stocks tend to rise when bond yields sink, says Mawer’s Paul Moroz.

Wells Fargo & Co.

Chart showing 12-month trailing stock performance for WFC

P/E: 12.9
Yield: 2.6%
1-year total return (C$): 36%

Blue chips can do well in a more volatile environment, says Moroz. This San Francisco–based bank will benefit from rising rates in U.S., home prices and consumer spending stateside.

Canadian Western Bank

Chart showing 12-month trailing stock performance for CWB

P/E: 10.5
Yield: 3%
1-year total return (C$): 21%

This Edmonton-based bank is down 10% year-to-date due to the slowdown in its backyard. People are overreacting, says Leith Wheeler portfolio manager Michael Schaab; he argues that cheaper rates should limit the number of loan defaults.

Tourmaline Oil Corp.

Chart showing 12-month trailing stock performance for TOU

P/E: 30
Yield: N/A
1-year total return (C$): 20%

Contrary to its name, this Calgary-based company produces natural gas. It’s trading at 31% below its August peak yet continues to grow production. It’s debt-averse, but it could now borrow at a lower rate if need be.

Valley National Bancorp.

Chart showing 12-month trailing stock performance for VLY

P/E: 17.1
Yield: 4.7%
1-year total return (C$): 16%

This bank, based in Wayne, N.J., generates more than 80% of its total revenues from net interest income. It does well when the U.S. economy does well.