In the last 12 months, an incredible development unfolded in North American markets:
Several of Canada’s most “boring” stocks outperformed the U.S. big tech giants.
Between February 2025 and February 2026, Canadian financial, utilities and energy stocks rose 29%, 19.4% and 26%, respectively. In the same period, the U.S. tech-heavy NASDAQ-100 Index gained just 12.7%, while paying far lower dividends than the TSX stocks just mentioned!
It has been a period of remarkable strength for Canada’s most boring industries. Not only are they performing well compared to expectations and their own past performance, they are beating the most talked about and hyped stocks in the world.
What’s driving the gains
The outperformance of “boring” Canadian stocks has been a long time in the making. Traditional industries have always worked pretty well in Canada. For decades, Canadian banks and energy companies outperformed Canadian tech. However, non-tech TSX stocks performed far worse than U.S. tech for the longest time. It’s only recently that Canadian names started beating even the most elite U.S. players.
The question is, what’s driving this? Normally, we expect riskier stocks to outperform less risky stocks, and tech stocks have historically been pretty volatile. Therefore, the behaviour observed in North American markets this past year has been unusual. We need to understand it before we can conclude that it will persist.
The recent outperformance of non-tech Canadian stocks was driven by two main factors:
- Cheap valuations.
- A perceived increase in the risk of U.S. assets.
The cheap valuations factor is easy enough to explain. At the start of 2025, Canadian banks and energy companies were trading at low-teens P/E ratios on average, while Canadian utilities traded at 20 times earnings on average. At the same time, the NASDAQ-100 traded at a weighted average P/E ratio of about 35, while the “Magnificent Seven” traded at over 40 times earnings on average. It’s not surprising that Canadian value stocks beat U.S. tech stocks in light of the valuation discrepancy, especially since companies like Apple and Tesla aren’t growth stocks anymore, despite their growth stock valuations.
Another factor behind the relative underperformance of U.S. tech in the last 12 months was the perceived increase in the risk of U.S. assets. Donald Trump’s second administration has been controversial; Trump’s tariff policy, in particular, has been seen as raising tensions between the U.S. and other countries. In the first few months of Trump’s administration, tariff hikes on 100-plus countries and a trade war with China, resulted in a dramatic sell-off in U.S. assets. Although markets recovered when Trump walked back his tariffs, lingering fear of future tensions likely held back returns.
One non-tech stock that has really thrived
One non-tech TSX stock that has really thrived recently is Toronto-Dominion Bank (TSX:TD). TD Bank gained 71% last year, and delivered 76% total returns with dividends included. It started off the year extremely cheap, trading at under 10 times earnings. As tech stocks crashed during the first part of 2025, TD made solid gains. Later in the year, when U.S. tech began to recover, TD kept rising, ending the year with significant outperformance. It was a stellar performance for the “boring” Canadian bank, and a perfect case study in how flashier is not always better.
