So far in 2025, the TSX Composite has surged 28% as surging artificial intelligence (AI)-related stocks, declining interest rates, and a better-than-expected economic outlook continue to boost investors’ confidence. As we head into 2026, the momentum could very well continue, especially if rate cuts accelerate and earnings growth remains resilient.
With AI adoption gaining speed and economic data continuing to defy gloomy forecasts, I expect next year to be even more exciting for stock investors. With that in mind, here are my three bold predictions for the Canadian stock market in 2026 — and the stocks I believe could benefit from the trends that may shape the year ahead.
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Prediction 1: A softer Bank of Canada will drive more upside for big banks in 2026
I expect the Bank of Canada (BoC) to move toward a more supportive stance in 2026 as inflation continues to cool and economic growth remains stable. That combination could ease pressure on borrowers and lift the overall banking sector. This is because if rates trend lower, banks could see healthier loan growth and a better balance between deposits and lending. One stock I believe could benefit from this setup is Bank of Nova Scotia (TSX:BNS), or Scotiabank.
What gives me confidence about Scotiabank’s upside is its recent financial performance. Notably, BNS delivered double-digit YoY (year-over-year) revenue growth in the fourth quarter of its fiscal 2025 (ended in October), and expanded profit margins despite a challenging rate environment. If conditions turn more favourable in 2026, those gains could have room to build further.
Prediction 2: AI’s real winners will keep powering higher in 2026
I believe 2026 will be less about AI hype and more about execution. Companies that are already generating strong revenue and earnings from AI-related demand could continue to outperform in the years ahead. And this is exactly why I’m optimistic about Celestica (TSX:CLS) as AI infrastructure spending stays strong.
My logic here is simple. CLS is already seeing rising demand from large customers investing heavily in data centre and AI hardware. The company backed this up with a 28% YoY revenue jump and expanding margins in the third quarter of 2025. With management forecasting continued growth into 2026, the trend appears to be supported by real orders, not just expectations.
Prediction 3: The real estate sector could surprise on the upside in 2026
I expect falling rates and lower borrowing costs to slowly bring capital back into real assets in 2026. Lower borrowing costs tend to support property values, real estate deal activity, and investor confidence, especially after a long period of caution. This setup could favour large asset managers with deep exposure to real estate, infrastructure, and credit. One top Canadian stock I believe could benefit from this shift is Brookfield Asset Management (TSX:BAM).
What supports this view is the company’s consistent focus on execution. In the third quarter of 2025, BAM raised a record US$30 billion and deployed US$23 billion across its strategies. The company’s distributable earnings reached US$661 million for the quarter, while its fee-related earnings rose 17% YoY, showing that client demand remains strong.
Moreover, BAM also continues to expand into long-term themes like infrastructure and real assets tied to housing and development. If rates move lower in 2026, that combination of scale, capital inflows, and recurring fees could give BAM stock a solid runway in the years ahead.
