With rates on hold on both sides of the border (U.S. Fed chair Kevin Warsh hit the pause button on Wednesday’s wobbly session), investors might be wondering if they should change how they invest as we move closer to the second half (H2) of 2026.
Indeed, rates are a pretty big deal for the stock market. The higher the costs of borrowing, the more pressure some of the CapEx-heavy firms stand to face. Either way, though, I think that there’s no sense in speculating where rates will go next, especially as central banks look to keep their ear to the data.
Of course, it’s easy to think that a rate hike or two is on the table just because of the oil spike due to the war in Iran. At the same time, with progress between the U.S. and Iran, things could end peacefully very suddenly. And for oil prices, that could mean a steep drop that might drastically reduce the odds of a rate hike. Any way you look at it, inflation is running hot.
With high food prices in Canada and America’s May inflation figure (the consumer price index) coming in at 4.2%, it can feel like the only path forward is hikes. But, in any case, I do think that given the market’s negative reaction to a hold, it’ll be a mystery as to what the next path will be. For investors, that’s not a bad thing. In my view, rate uncertainty is a volatility driver that can help you pick up stocks at discounts after an upsetting day like Wednesday.
As central banks stay on pause, at least for now, the following dividend giants, I think, stand out as great bets for the long term.
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Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS) shares gained close to 2% on Wednesday as the S&P 500 sagged following the U.S. FOMC meeting. As rates stay still in Canada and the U.S., the rate stability actually stands out as a major plus for a bank that seems to be completely fine with the current climate.
While the Big Six are more than capable of thriving if rates go 25 basis points (bps) higher or lower, I do think that Canada’s most international bank continues to be one of the market’s better buys if the “pause for longer” scenario with rates unfolds. Any way you look at it, BNS might be the last of the near-4% yielders in the Big Six. With a 3.8% yield and plenty of momentum behind the name, I’d look to hang in there, regardless of what the Bank of Canada or Fed are up to.
National Bank of Canada
No surprises here, another bank stock! National Bank of Canada (TSX: NA) is an easy Big Six name to forget about, primarily because it’s a relative lightweight with a market cap just north of $48 billion. What it lacks in size, though, it makes up for in relative growth.
The stock’s up over 60% in a year, and the price-to-earnings (P/E) multiple is getting up there, now at 19.3 times trailing P/E. Despite this, though, I still consider the name to be a winner as rates stay still for a while longer. Hawkish hold or dovish pause, NA stock looks like a great bet, even at a premium.
