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Canadian equities have been on a remarkable run over the last 18 months — and Lisa Conroy of Connor, Clark & Lunn thinks they’re just getting started.
Speaking on the Soundbites podcast this week, Conroy said everything from domestic policy to technology trends to geopolitics is lining up favourably for Canadian equities.
“There are several powerful structural themes reshaping the globe: onshoring, electrification, AI infrastructure investment, as well as just generally being in a higher inflationary world. All of these themes, all of these forces play to Canada’s strengths,” she said.
“It’s a great period to be a Canadian investor. What’s going to happen? Is there more room to run as we look over the coming years? The answer is yes.”
With the TSX up more than 50% in Canadian-dollar terms over the past 18 months, and outperforming both the S&P 500 and MSCI ACWI by more than 20%, her team has never been as excited about Canadian equities as it is today.
Gold was a major contributor to the TSX’s strong performance last year, while banks have accounted for a significant portion of returns over the past 12 months.
She said Canada’s stable political and legal environment has bolstered the case for Canadian investment, while new federal priorities aimed at unlocking investment and accelerating major projects are attracting international attention.
“We have a government that is finally focused on unlocking the country’s economic potential and building out the energy infrastructure we need to do that,” she said. “I appreciate there is execution risk around many of those policies and outlook, but certainly things are trending in the right direction.”
Canadian equities also continue to trade at a discount to the U.S. market, despite offering a similar earnings-growth profile, Conroy said.
“Despite what has been a good run for Canadian equities over the last 18 months, we continue to see an attractive entry point,” she said.
Conroy said Canadian banks have delivered exceptional returns over the past 18 months, leaving valuations near or at all-time highs. But she expects strong earnings growth to continue, supported by a steeper yield curve, AI-related efficiencies, a recovering Canadian economy and U.S. exposure at banks such as TD and BMO.
She also believes elevated valuations can be sustained, citing a more stable earnings profile during economic downturns and growing interest from foreign investors.
“We saw foreign ownership in Canadian banks move to record highs over the past six months,” she said. “Increasingly, investors outside of Canada are taking notice of what’s happening in our economy.”
The outlook for energy prices is less certain, she said, given geopolitical volatility. Rather than trying to predict oil prices, her team is looking for companies that can outperform across a range of commodity-price environments.
“While we’re operating in a highly uncertain energy backdrop, we are finding some attractive bottom-up opportunities in Suncor, Spartan Delta and Enerflex.”
Conroy also sees opportunities in sectors like transportation, infrastructure and the AI buildout.
After transportation stocks underperformed amid tariff uncertainty and weak manufacturing activity, improving U.S. manufacturing and attractive valuations created an opportunity to add CP Rail, Canadian National Rail and TFI International, she said.
And while U.S. hyperscalers in the AI field are getting a lot of attention, there are winners on this side of the border too. Her team is looking for companies where hyperscaler spending translates into earnings growth rather than relying on multiple expansion.
“We continue to see really attractive fundamentals, and the portfolio remains overweight stocks like Celestica, Hammond Power, Capital Power, Toromont and Enerflex,” she said. “And all of these companies, in various different ways, have exposure to the data centre buildout and AI infrastructure, where we see these capex dollars continue to come into these companies’ profits.”
The bottom line, she said, is a compelling outlook for Canadian equities.
“Canada has the resources the world increasingly needs, an improving policy backdrop, attractive valuation and growing global investor interest. We believe the ingredients are in place for a sustained period of opportunity in Canadian equities.”
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This article is part of the Soundbites program, powered by Canada Life. The article was written without sponsor input.