There’s good news and bad news for investors looking to put capital to work in equity markets in 2026. On the one hand, growth has remained robust in recent years despite relatively high interest rates (at least compared to the past two decades), with sequential double-digit annual returns enticing new investors to put capital into one of the only asset classes that can outstrip inflation over the long term.
On the other hand, there are bears who may rightly point out that valuations are starting to look frothy. Based on some metrics, these valuations are starting to look unsustainable, inviting a narrative around a potential market crash or downturn in the relatively near term.
For those who are more concerned about the latter bearish downsides to investing right now as opposed to the bullish upside narrative I highlighted first, here are three ways to benefit from interest rates coming down (as regulators look to spur additional growth in the economy) moving forward.
Fixed-income investing isn’t a thing of the past
Bonds and other fixed income investments (certificates of deposit, annuities, real estate, and other assets) have not had a great run in recent years. Part of that story is the reality that interest rates have not come down as many hoped they would, though rates are considerably below where they were in 2022 and 2023.
Now, owning bonds or other fixed-income assets has been a losing bet over the course of the past year. That said, I’m of the view that a well-diversified portfolio is one that should benefit from the potential for increased volatility ahead.
Taking risk in the market is what allows investors to earn significant returns over time. However, having strong risk-adjusted returns can be just as important. Owning bonds is one of the top strategies I think many investors are forgetting about right now.
Quality matters in the dividend stock world
There are plenty of world-class dividend stocks investors can choose from right now. The good news for investors is that the Canadian market has many such top picks that I’d invite investors to consider, such as the ones that I covered in a recent piece.
The great thing about owning dividend-paying equities is the double-whammy investors receive in the form of dividend income and capital-appreciation upside potential. These top Canadian dividend stocks are among my top picks in this regard, as they combine solid operating models (and robust fundamentals) with dividend appreciation upside.
Those thinking long term may want to hold some considerable exposure to such securities. That’s my view, at least.
Diversification matters
Aside from owning high-quality dividend stocks and fixed income securities, there are other asset classes which have benefited investors in recent years. Most notably, owning some allocation to precious metals and other commodities has been an uncertainty hedge which has been incredibly profitable.
It’s my view that many of the same catalysts which drove gold and silver (and other assets such as uranium and other minerals) to record highs will remain in place in 2026. Consider the debasement trade — or the idea that global currencies could lose value as more dollars are printed around the world. If you’re of the view that higher and higher deficits will reign supreme, diversifying one’s portfolio further among other asset classes make sense.
