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The continued strong rally in stocks is mystifying. If it holds, this is going to be the shortest bear market in history.

I don’t think that quick a rebound is likely. Historically, markets look ahead three to six months, and that’s reflected in share prices. But what will the world look like this fall? Based on what medical experts are telling us, we will still not have a coronavirus vaccine, although we may be getting close.

Without a vaccine, a major economic recovery is highly unlikely. That means the scenario for the next year or so is likely to be similar to the one we’re experiencing now. Unemployment will be high, corporate profits will be suppressed, global supply chains will be strained, demand for oil will remain low, money for new capital expenditures will be scarce, and many people will need government help to survive.

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That’s not a recipe for a bull market. I think when investors realize how long and difficult the road back is going to be, we’ll see a new downturn that will test the March lows. I don’t expect a true recovery to begin much before the latter part of the fourth quarter or the first quarter of 2021.

I’m not suggesting you should avoid stocks during this period. But they must be carefully chosen. I would not invest in broad market indexes at this point.

Instead, look for stocks that are likely to at least hold their value during this crisis and will emerge in a stronger position when it’s over. I call these Cornerstone Stocks. They offer products or services that are in high demand (many are essential services), have a sound balance sheet and pay a sustainable dividend.

Here are five Cornerstone Stocks I believe are worth considering at this time.

Precious metals

Franco-Nevada Corp. (FNV-T). Gold has always been a safe haven investment and it looks even more attractive now as the U.S. Federal Reserve Board has become a money-printing machine, weakening the U.S. dollar. I like this stock because it’s a mining royalty company – it doesn’t have to carry the cost of finding, developing and operating new mines itself. The shares are up 43 per cent so far this year.

Retailers

Walmart Inc. (WMT-N). Many companies are suffering during this downturn, laying off millions of workers in the process. Walmart is not one of them. Sales are booming – The Wall Street Journal reported last week they were up 20 per cent year-over-year in March. As a result, the company is hiring, big time. The retailer has added 150,000 new jobs and plans to hire another 50,000, although these positions will be mainly temporary. The stock pays a quarterly dividend of 54 US cents (US$2.16 a year), to yield 1.7 per cent at recent share prices.

Costco Wholesale Corp. (COST-Q). Costco is another retailer that’s doing well. Its March sales were up 11.7 per cent year-over-year, although the results over the next few months may not be as impressive due to new physical-distancing rules at its stores. The company showed confidence by raising its quarterly dividend by 7.7 per cent to 70 US cents, effective with the May 15 payment.

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Telecoms

AT&T Inc. (T-N). Communications companies may suffer some revenue declines this year, but these are solid businesses with steady cash flow. AT&T’s chief executive officer has stated the company has a strong balance sheet and is committed to fulfilling its dividend obligations. Despite that, the shares are trading below US$30. With a $2.08 annual payout, that works out to a yield of better than 7 per cent.

BCE Inc. (BCE-T). BCE has not made any commitment to maintain its dividend that I know of and first-quarter results aren’t due until May 7. As with AT&T, sales and earnings may be below expectations, but I don’t expect anything extraordinary. With a yield of 5.9 per cent, this is a core stock to hold through the crisis and beyond.

A word of caution. While these stocks should outperform the market in the coming months, markets look expensive at this point, as I pointed out at the start of this column. If you plan to make any purchases, use dollar-cost averaging. Buy 25 per cent now and increase your position gradually until you reach your target.

Gordon Pape is Editor and Publisher of the Internet Wealth Builder and Income Investor newsletters.

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