Don’t Overlook Value Stocks as the TSX Keeps Setting Record Highs

The BMO MSCI Canada Value Index ETF (TSX:ZVC) is a great ETF that more Canadians should be aware of in 2026.

Key Points
  • The TSX has outperformed the S&P 500 this year and looks like a safer, value-heavy alternative if AI/tech volatility returns, with banks, energy, and miners better positioned to weather a correction.
  • The BMO MSCI Canada Value ETF (ZVC) is a simple way to add Canadian value exposure — a value-focused index option with a 0.40% MER, 2.26% yield, 0.96 beta and strong YTD performance.

The final week of the year is quickly approaching, and it looks like the TSX Index is going to outshine the S&P 500, which seems to have been limited by its stretched valuation. Undoubtedly, the Canadian stock market had a magnificent year compared to the U.S. market, but compared to the rest of the world, it’s not a shocker of a year by any stretch of the imagination.

As global markets (beyond the U.S.) begin to march higher, thanks in part to their lower valuation multiples, perhaps it’s time to stick with the Canadian market, even though the U.S. seems to be where all the great mega-cap tech and AI exposure is. With the AI trade showing anxiety and small dents, perhaps sticking with value and proven cash flows is the way to go.

Though it’s hard to tell, I don’t think we’ve heard the last of the AI bubble fears or the skepticism of tech investors as we move into the new year. If anything, the new year could mean more of the same for the tech trade, especially as it reverses course again, with the tech-heavy Nasdaq 100 leading the way lower, while the value-heavy Dow Jones Industrial Average has been relatively steady. Sure, the Dow isn’t a great way to gauge the U.S. market. The S&P 500 is the way to go.

However, with so much exposure to the mega-cap tech titans, most notably the Magnificent Seven, I’d argue that the Dow is worth checking in on as the markets begin to come in. At the end of the day, it’s a seemingly arbitrary mix of 30 blue-chip stocks that, I think, is heavier on the value side than the cap-weighted S&P 500.

ETFs can contain investments such as stocks

Source: Getty Images

The Canadian market is worth sticking with

Either way, the TSX Index finished Wednesday’s wobbly session down less than 0.1%. That’s resilience, which, I think, could be key to side-stepping the next big market correction if an AI growth scare is upon us.

As the TSX Index continues to outdo the S&P, especially on the way down, I think betting on the Canadian value plays could be a winning strategy, or, at the very least, a way to step slightly further away from the blast zone should the AI trade go up in smoke at some point over the next 18 months or so. I personally don’t think a tech meltdown will happen, but I do think a correction, or even a mild bear market, cannot be ruled out for the year ahead, especially as the big AI spenders continue to rapidly implode.

A Canadian value ETF worth buying

So, what’s a quick and easy way to inject your TFSA or any other account with more value? Look no further than the BMO MSCI Canada Value Index ETF (TSX: ZVC), a low-cost value factor ETF that I think doesn’t get enough respect, especially in times like this when growth is fading and value is flexing its muscles. As the name of the ETF suggests, it’s an index ETF, which means a competitive management expense ratio (0.4% right now).

While a 0.4% MER is decent, it’s a bit higher than I’d come to expect from an index ETF. I chalk that down to scarcity since there aren’t all that many indices out there that follow such a value approach.

Either way, I like the mix of value names underneath the hood. You’re getting plenty of exposure to the big banks, the gold miners, energy producers, and several other wide-moat firms that you could consider relatively cheap. Personally, I think this value-focused ETF is built to win in 2026. The ETF has a richer yield (2.26%) than the TSX Index, a slightly lower beta (0.96), and a bit more momentum (shares up over 26% year to date vs. 25% for the TSX Index).

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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