Interest Rates Aren’t Falling: Here’s What I’d Do With My TFSA

Aritzia (TSX:ATZ) stock looks like a growth buy, regardless of where rates end up.

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Key Points
  • Don’t build your TFSA around guessing the Bank of Canada’s next move—focus on durable businesses with strong long-term demand instead of trying to trade rate calls.
  • Aritzia stands out as a growth stock that can keep taking share and expanding in the U.S. regardless of where rates go, thanks to a strong brand and continued investment in stores and digital.

Interest rate cuts seem to be off the table, at least for the time being. With the Bank of Canada (BoC) holding off and investors wondering what the next move will be, questions linger about how to prep one’s Personally, I think that for the average Tax-Free Savings Account (TFSA) investor, it matters less what the BoC is thinking and what they’ll end up doing next. For everyday investors, I’d think more about the secular opportunities at hand, which, I believe, will outlast rate policy and even a potential technical recession. At the end of the day, it’s more about buying great businesses at good deals rather than starting from rates and going down from there.

for the rate world to come. Indeed, it’s hard to predict right now as that inflation and employment balance becomes a tougher tightrope to walk down.

Personally, I think that for the average TFSA investor, it matters less what the BoC is thinking and what they’ll end up doing next. For everyday investors, I’d think more about the secular opportunities at hand, which, I believe, will outlast rate policy and even a potential technical recession. At the end of the day, it’s more about buying great businesses at good deals rather than starting from rates and going down from there.

woman considering the future

Source: Getty Images

Don’t overthink rates or the macro picture

Sure, it’s nice to have some visibility into the macro picture, but, at the same time, long-term investors should know that things are going to change in surprising ways and it becomes really hard to predict where the market is going next, especially given the variables involved and the likelihood that others have already caught on to a hot macro trade, making the chance to score a better risk-adjusted return limited. Think about the AI trade and how it’s shifted from semiconductors to energy.

It feels like a great trade, but most others have already caught on. Regarding rates, I view the theme as less important, especially when you consider the potential for rates to stay on pause for longer. Playing a cut or a hike might not be the way to go. So, in short, what would I do with a TFSA or anything else (maybe a Registered Retirement Savings Plan or First Home Savings Account) as rates refuse to move lower at the BoC’s hands? Absolutely nothing. It’s not all that big of a deal. But what I would do is consider the value names, especially if the risk/reward scenario still makes sense, and go from there.

Aritzia: A growth hero worth sticking with

Aritzia (TSX: ATZ) stands out as a growth company that can do well if rates go higher, lower, or stay the same for the long run. Why? It has a durable, powerful, and proven growth trajectory. Just look at the state of the apparel market right now. It’s under pressure. But Aritzia is thriving because it’s an up-and-comer with a disruptive tailwind at its back. Indeed, apparel moats have been challenged, and a fast-mover like Aritzia seems to be one of the many disruptors that could continue to take share, especially as the firm expands upon its growth in the U.S. market.

In my view, it’s hard not to be excited, given the growing brand affinity and how much runway the $19.3 billion company still has. The firm has surpassed Lululemon as the larger of the Vancouver-based apparel retailers, and for good reason. As the firm continues investing in digital while beefing up the in-store model, all while putting money to work expanding in the U.S. market, I find the name to be a worthy growth addition, even if borrowing costs don’t move lower anytime soon.

In short, Aritzia is the kind of growth business you should strive to own — one that can win regardless of the story with rates.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Aritzia. The Motley Fool recommends Lululemon Athletica Inc. The Motley Fool has a disclosure policy.

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