One quarter into 2026, the Bank of Canada appears content to keep interest rates steady.
The bank last changed its policy rate in October of 2025, which was about half a year ago. Since then, the bank has repeatedly decided to keep rates where they are. That probably shouldn’t be surprising. Currently, Canada faces trade pressures from the U.S., which has been raising tariffs on us. That would tend to argue for low rates and economic stimulation. On the other hand, Canada also faces pressure from an inflated housing market, a factor that might argue for high rates. Giving these conflicting needs, we’d expect the bank to keep rates at a “moderately high” level (by recent history’s standards), and that’s what it’s doing.
The question investors need to ask themselves is, “How do you invest during times like these?” Canada’s interest rates show no clear movement in either direction, and are neither very high nor very low. This picture is tough to describe accurately, making investment decisions difficult. In this article, I’ll share two stocks that I think should fare well in the current interest rate environment.
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TD Bank
The Toronto-Dominion Bank (TSX:TD) is a Canadian bank that has highly diversified operations, leading to opportunities to make money in a variety of interest rate regimes. The company’s core Canadian banking business benefits when interest rates are higher in Canada (by the standards of recent history, they are moderately high now). Its investment banking business, on the other hand, benefits from increased dealmaking in periods of low interest rates and high economic growth. So, TD can benefit from the current, relatively steady interest rate regime, and it would be in a position to profit off of lower rates in the future as well.
One thing is certain:
TD Bank is really crushing it this year. Despite being under a $430 billion asset cap in the U.S., the bank grew its revenue 23% and its earnings 162% in the trailing 12-month period. On adjusted basis, revenue grew 8%–11% while earnings grew 16%. Not bad for a bank that, in late 2024, was warning investors it would struggle to grow in the year ahead!
Growth isn’t the only thing TD has going for it. The bank is also highly profitable, with a 32% net income margin (profit margin) and an 18% return on equity (ROE) in the trailing 12-month period. Overall, times appear to be good for TD.
Brookfield
Brookfield Corp (TSX:BN) is another Canadian financial conglomerate. Unlike TD, which is a bank, Brookfield is a diversified financial institution, active in alternative asset management, private equity, real estate, insurance, renewable energy and infrastructure. The company offers a number of funds and REITs to its institutional clients, who pay Brookfield to access unique and exotic asset classes.
Brookfield responds to interest rates differently than TD does. Whereas lending is more profitable when rates are high, dealmaking tends to be more profitable when rates are low. In today’s “moderately high” rate environment, both Brookfield and TD have room to grow. Additionally, holding the two of them side by side in your portfolio could be a good way to hedge against the possible adverse interest rate impacts from either one of hem.
