If Interest Rates Continue to Fall, These Are the 2 Stocks to Own

Here are two stocks to own for long-term investors seeking both growth and long-term viability in this uncertain macro backdrop.

| More on:
data analyze research

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

When interest rates continue to fall, finding growth stocks with the right business models to take advantage of this shifting macro environment is important. Lately, we’ve seen a rotation build from large-cap stocks to smaller companies that may be more interest rate sensitive. But it’s also true that some large-cap companies may have greater upside as a result of declining interest rates.

These two stocks certainly fit into this bucket. Let’s dive into why these two large-cap Canadian stocks may be worth considering right now as the Bank of Canada continues to cut rates.

TD Bank

Toronto-Dominion Bank (TSX:TD) is one of the largest banks in Canada, with more than 27.5 million customers globally. The bank operates in four segments: Canadian personal and commercial banking, US retail banking, wholesale banking, and wealth management and insurance. 

Created with Highcharts 11.4.3Toronto-Dominion Bank PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

TD Bank had approximately CA$1.9 trillion in assets in 2023, and has positioned itself as one of the world’s leading online financial services firms. On May 22, 2024, Toronto-Dominion Bank released its financial reports for the second quarter of fiscal year 2024. The report highlighted that its reported diluted earnings per share was $1.35, and adjusted diluted earnings per share came in at $2.04. 

Many investors, myself included, look at declining interest rates as a key tailwind for the bank. As the cost of borrowing short is reduced, and the benefits of lending long improves, this is a bank which could see outsized profitability over the long term. In addition to the company’s productivity push and other measures, which have already had a positive outcome on these factors, there’s a lot to like about TD stock right now.

Shopify

Shopify (TSX:SHOP) is one of the leading global e-commerce companies that provides a platform for small- and medium-scale businesses to sell their products and services. Operating in more than 175 countries, Shopify Inc. offers reliable, customized, secured and speedy services to online customers through its platform. 

Created with Highcharts 11.4.3Shopify PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

In the first quarter of 2024, Shopify reported an increase of 23% in its gross merchandise volume, amounting to US$60.4 billion. In addition, the company also reported a revenue increase of 23%, amounting to US$1.9 billion. Shopify’s gross margin during the quarter was 51.4%, a rise from the previous year’s first quarter of 47.5%. 

From a valuation perspective, higher-growth companies like Shopify benefit from lower interest rates. That’s because valuation multiples for higher-growth stocks which have yet to reach their full potential tend to expand in such environments. Indeed, we all saw where Shopify was trading following the pandemic. A return toward near-zero interest rates would certainly be a positive for this company.

In addition to re-accelerating growth, there’s a lot to like about how Shopify is positioned to take advantage of this new lower-rate environment.

Should you invest $1,000 in CIBC right now?

Before you buy stock in CIBC, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and CIBC wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Investing

Stocks for Beginners

Dip Buyers Could Win Big: The Best Canadian Stocks to Buy Now

These two growth stocks have taken hits recently, but their fundamentals remain strong, and their growth prospects are intact.

Read more »

A bull and bear face off.
Stock Market

Bear Market Bargains Emerge as Recession Stocks Return

If you want a deal, then go to the best stocks during a recession market dip.

Read more »

Canadian Red maple leaves seamless wallpaper pattern
Dividend Stocks

5 Canadian Dividend Stocks to Buy and Hold for the Next 20 Years

These Canadian stocks have paid dividends for decades, making them reliable investments to generate regular passive income.

Read more »

An investor uses a tablet
Stocks for Beginners

The Smartest Canadian Stock to Buy With $250 Right Now

Are you looking for the smartest Canadian stock to buy right now? Consider this gem and avoid market volatility.

Read more »

Dividend Stocks

3 Canadian REIT Stocks to Buy and Hold for the Next Quarter-Century

These three Canadian REITs trade cheaply and are highly reliable, making them some of the best stocks you can buy…

Read more »

Electricity transmission towers with orange glowing wires against night sky
Investing

Fortis Just Might Be the Best Canadian Dividend Stock to Buy in April

Let's dive into a few reasons why Canadian utility giant Fortis (TSX:FTS) still looks like a screaming buy heading into…

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Dividend Stocks

1 Practically Perfect Canadian Stock Down 24% to Buy Now and Hold for Life!

CNR stock is a top Canadian stock for investors, especially with shares down on the TSX today.

Read more »

a man relaxes with his feet on a pile of books
Investing

Got $7,000? How I’d Spread It Across 5 Blue-Chip Stocks for an Investing Foundation

Spreading $7,000 across these five blue-chip stocks provides a solid foundation for long-term financial success.

Read more »