The Canadian stock market is getting really hot, just in time for summer, but that alone is no reason to bail on TSX stocks, especially since the relative value proposition (comparing multiples to the S&P 500 as well as some global indices) is still looking quite strong.
Either way, there may be no stopping the following ETFs, which are in full-on bull-market mode, from continuing to win as tailwinds at their back of the Canadian market look to stick around for a while longer, regardless of what the Bank of Canada decides to do next on the front of interest rates.
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Vanguard S&P 500 Index ETF (CAD-Hedged)
The Vanguard S&P 500 Index ETF (CAD-Hedged) (TSX:ZSP) stands out as a terrific low-cost way to continue betting on the American market as a Canadian investor who doesn’t want to be caught on the receiving end once the loonie finally has a chance to rally back against the greenback. Indeed, the Canadian dollar has been in a tough place versus the U.S. dollar, thanks in part to the U.S. Federal Reserve’s comments about inflation south of the border.
While inflation has weighed heavily in Canada as well, it seems like America’s employment situation could absorb a rate hike or two in the second half. Any way you look at it, I think the odds that the Fed hikes while the Bank of Canada stays on standby are high, and that could mean tough sledding for the loonie, at least until the Bank of Canada is ready to follow suit with hikes of its own to stomp out what remains of inflation.
Personally, I think the S&P 500 is a stellar bet, even at stretched multiples, especially if you’re light on those mega-cap AI stocks. Given the index is heavily weighted towards such names, I think you can’t go wrong with the S&P 500. The ZSP is a great low-cost ETF that can provide CAD-hedging benefits for those who think the loonie is nearing a low point at a hair above US$0.70. If the loonie rallies alongside the S&P 500, the currency move won’t eat into that return.
iShares S&P/TSX Capped Energy Index ETF
The iShares S&P/TSX Capped Energy Index ETF (TSX:XEG) is a stellar way to bet broadly on the Canadian energy scene, which recently tumbled into a correction.
Shares are down 17%, but have a nice yield of 2.8%, making it a great fit for investors willing to brave the negative momentum for better value and slightly higher yields. Sure, oil prices are falling, but, at the end of the day, I still think it’s best for long-term investors to nibble into weakness while most others sell.
iShares Core MSCI Canadian Quality Dividend Index ETF
The iShares Core MSCI Canadian Quality Dividend Index ETF (TSX:XDIV) is starting to become my preferred dividend ETF, not just because of the quality factor, but because of the ultra-low management expense ratio (currently at 0.11%).
With a nice 3.3% dividend yield and a whopping 20% gain in the books for 2026 so far, I do think the yield-heavy TSX dividend ETF is an easy pick to make, even if valuations tilt towards the higher side.
