January often acts as a psychological and strategic reset for investors. After a powerful multi-year rally in Canadian equities, investors have entered 2026 facing elevated valuations and renewed questions around the sustainability of the rally.
Using iShares S&P/TSX 60 Index ETF (TSX:XIU) as a market proxy, Canadian stock market value has nearly doubled since 2021, delivering annualized returns of roughly 16%, including a strong 28% return over the past 12 months.
As January trading sets expectations for the year, investors should keep watch on five influential stocks: Royal Bank of Canada (TSX:RY), Toronto-Dominion Bank (TSX:TD), Agnico Eagle Mines (TSX:AEM), Enbridge (TSX:ENB), and Shopify (TSX:SHOP).
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Big banks: Strength, but signs of fatigue
Financials remain a cornerstone of the Canadian market, and RBC and TD continue to command significant influence. Royal Bank, trading around $229 per share, appears to be plateauing after a strong run. At roughly 15.6 times earnings — its highest valuation since 2010 — the stock sits about 29% above its long-term normal valuation. Historically, such stretches have led to periods of consolidation or modest pullbacks, suggesting greater downside risk if earnings growth slows.
TD shares tell a similar story. At approximately $130 per share and trading at 15.3 times earnings, TD also looks expensive relative to its historical norms. While both banks remain high-quality franchises with reliable dividends, January performance signal investors may be less willing to pay premium valuations even for these Steadie Eddie banks.
Gold and pipelines
A shift in sector leadership has taken place. Materials have overtaken energy in the XIU’s weighting, driven largely by a surge in precious metals. Agnico Eagle Mines has been a major beneficiary, delivering a remarkable 294% gain since 2024. The company’s strong operational base — about 85% of production and 87% of reserves located in Canada — adds geopolitical stability to its appeal. With 2025 production guidance of 3.3 to 3.5 million ounces and gold prices remaining elevated, the stock’s technical uptrend remains intact so far into the year.
Meanwhile, Enbridge continues to appeal to income-focused investors. Up roughly 37% since 2024, Enbridge yields close to 6% and boasts an impressive 30-year dividend-growth record. However, dividend increases have slowed to about 3% annually in recent years, and the stock has been trending lower since late 2025. As analysts believe the stock is fairly valued, it would be interesting to see if income investors would step back in or remain cautious and wait for a bigger pullback.
Shopify: Growth at a premium
Shopify is the lone high-growth technology name among the group. The stock is up approximately 81% since 2024, supported by expectations of continued double-digit earnings growth. That growth comes at a steep price: shares trade near $186, or about 90 times earnings and 72 times forward earnings. Shopify stock pulled back in January, revealing investors may be more cautious towards high-beta growth stocks in a more valuation-sensitive market.
Investor takeaway
These five stocks collectively represent about 28% of the XIU and act as a cross-section of Canada’s market leadership. As the year unfolds, their performance may provide early clues about sector rotation, valuation tolerance, and investor sentiment for 2026. Watching how these leaders behave could help investors better position their portfolios for the year ahead.
