2 Canadian Stock Market Predictions for 2025

Wondering what Canadian stocks could perform well despite the trade war? These stocks could be a solid place to invest in 2025.

| More on:
clock time

Image source: Getty Images

Predicting what Canadian stocks will do in 2025 is about as easy as predicting the final score and outcome of the Super Bowl. You can weigh various factors and determine the odds. Yet, the final result could be completely different to what you could even imagine is possible.

Predicting what stocks will do in the near term is very tough

Thousands of factors and variables can affect the stock market. In the short term (like weeks and months), the performance of the stock market is largely out of an investor’s control. The broader market can swing up and down for seemingly irrelevant or uncorrelated reasons.

Fortunately, in the long run, stocks can be a little more predictable. On average, the Canadian index delivers a 6–7% return. U.S. indices average higher at 8–9%.

Over the long term, Canadian stocks tend to follow the trajectory of their per share earnings/cash flow. It is an investor’s job to sift through the noise to find the stocks that can steadily perform through the market’s ups and downs.

With that in mind, here are two predictions for the Canadian stock market in 2025.

Canadian stocks in real assets could revert to the mean (but there is an if)

The first is that real assets that generate strong income will finally catch a bid in the second half of 2025. Right now, income-yielding bond alternatives have been taking a beating. Despite interest rates dropping, bond yields have remained elevated. Much of this is due to concerns around a North American tariff war.

We are only in the early innings of a potential trade battle. However, if (that is a big if) a compromise or resolution is discovered sooner than many expect, bond yields could start to settle down. That would have an inverse effect on real assets like Canadian real estate investment trusts (REITs) and infrastructure stocks (like pipelines).

Likewise, with concerns about trade issues, safe domestic assets that generate stable income could become attractive to hold. First Capital REIT (TSX:FCR.UN) has a high quality portfolio of grocer-anchored retail properties across Canada.

Even if a recession hits, people need groceries, pharmacies, discount stores, and doctors’ clinics. These make up a majority of First Capital’s tenants. Due to its excellent locations, it has been enjoying high single-digit rent growth.

Despite its strong fundamentals, this Canadian stock trades at a material discount to the private market value of its assets. At some point, investors will return to the unloved REIT space. First Capital could enjoy material upside.

Specialized, niche software stocks could outperform in 2025

Another prediction is that Canadian tech stocks with specialized niche applications should do well through tough economic times. Descartes Systems Group (TSX:DSG) could be a shining star in 2025. It provides software solutions for the logistics, transport, and supply chain sectors.

It has solutions to help companies manage the impact of tariffs and taxes on cross-border shipments. If there is a great emphasis on trade compliance, Descartes’ solutions will be in high demand. The cloud-based logistics and supply chain solutions provider tends to see a boost in demand when there is elevated trade disruption around the world.

Constellation Software (TSX:CSU) is another company that should fare well. Its niche software companies tend to operate very close to their customers. That means that they are often the locally preferred solution for specific industry solutions. Its software is often crucial to its customer business operations.

I don’t see a trade war disrupting their business much at all. In fact, a tough economy could be a net positive for Constellation.

The acquisitive firm can opportunistically deploy capital into cheap software businesses that are facing near-term challenges. Overall, this Canadian stock could continue to perform well in light of some of the potential economic challenges to come.

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 Robin Brown has positions in Constellation Software and Descartes Systems Group. The Motley Fool recommends Constellation Software, Descartes Systems Group, and First Capital Real Estate Investment Trust. The Motley Fool has a disclosure policy.

More on Stock Market

Man data analyze
Stock Market

U.S.-Canada Trade War: Here’s What it Means for TSX Investors

Here’s why the U.S.-Canada trade war may not have a lasting impact on long-term investors despite short-term disruptions and market…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Stock Market

Where to Invest Your $7,000 TFSA Contribution 

The U.S. and Canada trade war is signaling a year of economic downturn. Where could you invest TFSA money in…

Read more »

Start line on the highway
Stock Market

Serious Value: 3 TSX Stocks to Buy in the New Year

Are you looking for some serious value on the TSX? These three stocks could be due for a rebound in…

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Monday, February 3

Escalating U.S.-Canada trade tensions will remain on TSX investors’ radar today as they assess the potential impact of tariffs on…

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Friday, January 31

After posting a fresh all-time high in the previous session, the TSX Composite Index remains on track to post its…

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Thursday, January 30

The U.S. GDP growth numbers will remain on TSX investors’ radar today, even as the market continues to assess the…

Read more »

An analyst uses a computer and dashboard for data business analysis and Data Management System with KPI and metrics connected to the database for technology finance, operations, sales, marketing, and artificial intelligence.
Tech Stocks

The Savviest U.S. Stocks to Buy With $25,000 Right Now

Looking for some great U.S. stocks to own in your portfolio? Here are some of the savviest U.S. stocks Canadians…

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Wednesday, January 29

TSX investors will keep a close watch on interest rate moves from the BoC and the Fed today, anticipating signs…

Read more »