The TSX Index may be blasting off to new all-time highs in response to Fed commentary south of the border, which also sent U.S. markets on an impressive Friday surge. And while the broad stock market is starting to get frothy again as the S&P 500 looks to inch closer to that 7,000 milestone, I think that it’s an absolute mistake to book profits in August.
In a prior piece, I remarked on the so-called “September effect,” which may entice some to sell now with the intent of asking questions later. Given the high likelihood of a Fed rate cut, I believe stocks are poised to continue moving higher. Time will tell if the Fed will be more dovish from now on. If the U.S. economy weakens, it’s likely that the Fed will offer rate cuts to keep investors (and President Trump) enthused. In any case, the U.S. stock market is in the driver’s seat, and the TSX Index seems ready to ride higher on good news south of the border.
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BCE and CNR shares are among the cheapest of blue-chip dividend stocks
BCE (TSX: BCE) and CN Rail (TSX: CNR) stand out as neglected value names that stand to benefit as rate cuts come to be and the economy looks to steer higher again going into the new year. Indeed, it’s been a tough 2025 for shares of BCE and CN Rail. At the time of this writing, shares of BCE and CNR are up 5% and down 10%, respectively, year to date. They’ve been left behind amid the great TSX Index rally of 2025, now up just over 12%.
And there’s still a quarter and a half to go in the year! Indeed, Trump tariffs were scary in the first half of the year, but now, focus has shifted to deal-making. With Canada dropping counter tariffs on U.S. goods, I believe that tensions between the two nations are fading.
Of course, there’s no guarantee that the gesture will cause Trump to ink a new deal. However, I think that the trade war is getting closer to a peaceful ending. Though it’s hard to tell, I think a deal will be inked before 2026 arrives, especially given Trump’s commentary on the recent countertariff removal.
Will reciprocal tariffs be replaced with reciprocal kindness?
Who knows? Either way, it’s not too far-fetched to imagine a tariff-free economy that’s ready to move on come 2026. And for BCE and CN Rail, two economically sensitive names that have been hurting, I think the new year could be a recovery year.
In prior pieces, I praised BCE stock as a great bet. The yield sits at 4.9% and the firm is eager to add to its upbeat second quarter with more strength. Sure, the telecom industry isn’t the same as it was when the top incumbent players were market darlings. However, I find there to be ample value in the space today.
Additionally, CN Rail is another name that’s well-equipped to pick it up after derailing in 2025. The performance has been horrid and the full-year outlook is grim, but I think shares are a deep-value bargain at 17.1 times forward price to earnings (P/E). With one of the widest moats out there, I’m shocked how cheap shares are, even if management is leaving investors in a frustrating spot after tanking for a year and a half.
Will this year’s laggards be next year’s leaders?
Time will tell. But I wouldn’t bet against them while they’ve watched the TSX Index run from the bleachers. It’s time for them to get in the game, and I think they’ll be exiting the penalty box very soon, as Canada’s economy looks to roll higher. Perhaps a timely trade deal and an artificial intelligence boost would be enough to keep the TSX going strong.
