The TSX Index is actually beating the S&P 500 for 2025, a rare achievement that Canadian investors shouldn’t get used to, especially as the artificial intelligence (AI) boom continues to nudge mega-cap tech to impressive performance. Indeed, the S&P 500 has the mega-cap AI tech titans at its side. And while the AI trade could be in for a cooldown, I don’t believe that the TSX Index’s S&P-beating ways will sustain for the long haul.
Not to take away from the TSX’s outperformance, but as a Canadian investor, I’d look to stay diversified on both sides of the border and not look to “play” one index one way or the other. Arguably, I think the S&P 500 combined with the TSX Index makes a potent combo. On their own, the S&P 500 or the TSX Index may not be as diversified as an investor would think. Indeed, the S&P 500 may have enough stocks (500) to be considered more than diversified.
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TSX or S&P 500? Why not own both, plus some individual stocks that look cheap despite their AI growth catalysts?
However, much of the exposure is concentrated at the top, with the more-than-$1 trillion tech titans having way too much influence on where the major index heads on any given day.
As for the TSX Index, it’s too light on technology and too heavy on banks, pipelines, and miners. When combined, though, the S&P 500 and TSX combo packs a tech punch with a nice jolt to the cheaper sectors (energy and financials), making for smoother sailing on the way down if it is tech that feels the most pain when the next correction comes as well as a respectable amount of dividends (the TSX Index’s 2.6% yield is far more generous than the S&P 500’s 1.1%) flowing in.
As for my preferred TSX ETF, I’m a fan of Vanguard FTSE Canada Index ETF (TSX:VCE). It’s a low-cost way to bet on Canada while getting paid a 2.61% yield for doing so. As for what’s next, nobody knows. Either way, I think adding some individual value names with AI catalysts could make a lot of sense, especially since there are real earnings gains to be had from the revolutionary technology.
Apple
Apple (NASDAQ:AAPL) stands out as a Magnificent Seven year-to-date underperformer that may be worth scooping up as shares attempt to reach breakeven on the year (shares are still down 2% year to date). Undoubtedly, the latest iPhones didn’t really excite investors when Apple revealed them to the world through its keynote. In fact, shares slipped as investors questioned whether such devices would entice consumers to upgrade.
Indeed, the iPhone 17 Pro saw a big design change and a shift back to aluminum from titanium for more efficient cooling. While I’m not the biggest fan of the design, I must say that it is an incredibly functional device for “pro” use cases. And while the iPhone 17 base model wasn’t all too surprising, I must say it packs a lot of capable hardware for a competitive price. Indeed, the iPhone 17 base may very well offer one of the best bangs for the buck out there. Finally, Apple also pulled the curtain on the iPhone Air, its thinnest design yet, which, I think, could be a surprisingly hot seller.
In any case, iPhone 17 lead times are up, and it paints a picture of better-than-expected demand. Personally, I’m most interested in how the impressively thin iPhone Air will do relative to the Pro. Time will tell. Either way, there wasn’t much on the AI front to get excited about in the latest keynote. However, that could change in 2026, when Siri receives a facelift.
Bottom line
The TSX Index may or may not beat the S&P 500 for the rest of the year. Either way, I’d strive to own both indices as well as individual names that might have underappreciated AI catalysts that loom. Apple stock looks dirt-cheap after doing nothing this year, and I think it’s ready to rise again in 2026 as its new devices look to sell well while new AI innovations come online.
