The Canadian stock market got off to a hot start to the year but is still trading below all-time highs. The S&P/TSX Composite Index surged more than 5% in January and has been trading mostly sideways since early February. That puts the index down close to 10% from all-time highs set in early 2021.
Could the Canadian stock market be on the cusp of a rebound?
After eight consecutive increases, the Bank of Canada decided last week to hold its key interest rate steady. Inflation remains far higher than pre-pandemic levels, but the Bank of Canada remains optimistic in its forecast to bring inflation down closer to 3% by mid-2023.
Lower interest rates and inflation are certainly a welcomed sight for consumers. There’s still lots of short-term uncertainty in the economy, but there’s finally a reason for investors to believe that the worst may be behind us.
With that said, I’ve put together a list of three top TSX stocks that Canadian investors should seriously consider buying before the market begins to rally.
Shopify
Already up more than 20% in 2023, now’s the time to be loading up on this discounted tech giant.
Along with many other tech stocks, shares of Shopify (TSX:SHOP) plummeted in 2022 after a massive bull run following the COVID-19 market crash in 2020. Even with the strong start to the year, shares are still down 70% from all-time highs.
The selloff in 2022 wasn’t all that surprising after the multi-bagger returns that were generated in a very short period of time.
Shopify remains in a prime position to continue capturing market share in the growing e-commerce space. I don’t think it will be long before the growth stock is back to its market-beating ways.
goeasy
goeasy (TSX:GSY) may not generate the same amount of buzz as Shopify, but growth investors shouldn’t sleep on this under-the-radar stock.
Shares of goeasy are up 200% over the past five years, easily outpacing the broader Canadian stock market’s return of just over 30%. Go back another five years, and the market-crushing gains only continue for the company.
High interest rates have hurt goeasy, but I’d only expect the pain to be short term. As interest rates begin dropping, demand for the consumer-facing company’s financial services should begin to rebound.
This is not a growth stock that goes on sale often, especially at a discount as large as this.
Air Canada
Demand for travel has already begun to spike but shares of Air Canada (TSX:AC) haven’t felt that bump yet. Shares of Canada’s largest airline are about flat over the past year and are still trading more than 50% below pre-pandemic prices.
While the airline industry isn’t typically known for generating market-beating returns, Air Canada has done plenty to challenge that. Prior to the start of 2020, Air Canada had spent the previous decade consistently outperforming the market.
Because of Air Canada’s strong market-beating track record, I’d be comfortable taking a position in the beaten-down stock ahead of a potential market rebound.
Investors may need to be patient with this one, but there’s plenty of upside here for those with long-term time horizons.
