The headlines have been flooded with news surrounding the U.S. Federal Reserve’s first rate cut in quite a while. And while the broad markets have reacted quite positively (really, who didn’t see the 25 bps rate cut coming this week?), I do think that it’s the Bank of Canada’s own rate cut that deserves equal attention from Canadian investors.
With the TSX Index already off to the races, the latest cut might just allow the TSX Index to proceed forward, perhaps at the same impressive pace we’ve seen throughout the year. In prior pieces, I highlighted the TSX’s outperformance relative to the S&P 500 and how it’d get tougher to do, especially as the Fed began its own rate-cut cycle.
Although it’s difficult to predict how lower rates will come into play, I believe that high-growth tech plays could continue to do much of the heavy lifting. In any case, with central banks on both sides of the border in rate-cutting mode, investors may wish to pursue the value names before any rate-related multiple expansion begins to kick in.
Shopify
First up, we have shares of e-commerce innovator Shopify (TSX:SHOP), which received a nice 3% lift on Thursday’s session. And while shares aren’t exactly cheap enough to be considered a traditional value play, I do think that the lower-rate climate and AI catalysts could make the seemingly expensive stock seem like a value play relative to its hyper-growth profile. Indeed, there’s a lot of innovation underneath the hood, and with a founder CEO who has been right nearly every step of the way, I’d seriously consider adding the name to a watchlist or buying a very small number of shares today.
Either way, lower rates bode well for tech, especially fast-growing tech firms poised to effectively integrate AI right across the ecosystem. Shopify was already a magnificent tech stock in a higher-rate environment. As the Bank of Canada and Fed both trim away at rates, I’d be inclined to view Shopify as one of Canada’s most magnificent growth plays.
As rates gravitate lower, I’d look for Shopify to really start making the smart acquisitions in AI, e-commerce, payments (financial technology), and even augmented reality. Sure, the current valuation entails a great deal of risk, but if you can handle the wild swings, I’d not be afraid to keep adding to a position gradually.
In a previous piece, I mentioned waiting for a breakout confirmation (above $212–213 per share) before initiating a position. However, I’d have to change my tune, given the AI and rate tailwinds might be strong enough to fuel a nearer-term breakout to new highs.
CIBC
CIBC (TSX:CM) is another name that could enjoy lower rates going into 2026. The Canadian banks have already been in a ferocious bull market in 2025. As lower rates spark more loan and mortgage growth demand, CIBC may very well be one of the best-positioned domestic banks to pick up. Indeed, it has a fairly large mortgage loan book. And as rates retreat, I’d look for CIBC’s loans to really pick up traction. Of course, shares really do look overheated after doubling in two years (101% gains).
Still, a 13.4 times trailing price-to-earnings (P/E) isn’t close to expensive. And if loan growth does stay hot going into year’s end, I still view CM shares as a value play. In any case, look for more growth, more generous dividend hikes (3.5% yield today), and perhaps more positive surprises from the $103 billion bank that’s proving itself one of the more premier names in the Big Six.
