There are some historical trends worth keeping an eye on, but ‘reading the tea leaves’, so to speak, does not take into account idiosyncratic risks that arise from time to time. At this point, I see both market and stock-specific risks increasing, so I may be less inclined to believe that a Santa Claus rally is coming this year, unlike in recent years.
The point is that there are reasons why stocks tend to rally towards the end of the year, as investors reallocate their positions for tax reasons and try to put some capital to work before the end of the year. For those who think this year will be like most others and that we’ll be heading into the new year, here are two stocks to consider right now.
Shopify
Perhaps the most momentum-packed stock in the Canadian stock market right now Shopify (TSX: STORE).
Looking at the company’s chart above, it’s clear that this recent sell-off is a blip on the radar in what is otherwise a very strong uptrend. Investors seem to be focusing their efforts on finding growth stocks that have the kind of fundamental catalysts (and balance sheet strength) that can get them through whatever cycle comes their way.
Still trading near all-time highs, it will be interesting to see if this momentum can be sustained into the new year. I believe that Shopify is an excellent long-term holding, and I have held this view for a few years (was initially skeptical about the company’s valuation relative to its growth prospects).
The point is that Shopify has consistently shown its ability to grow in different environments, with the pandemic even boosting the company’s revenue and profit numbers.
All else being equal, this is the best Canadian growth stock I would focus on as a way to maintain continued momentum through the end of 2025.
Royal Bank of Canada
I have become more and more optimistic Royal Bank of Canada (TSX:RY) as one of the best ways for investors to gain exposure to the Canadian financial sector in recent months.
A lot of this has to do with some interesting trends I’m seeing beneath the surface that could impact the US financial sector, especially among regional banks.
Royal Bank is highly regarded worldwide as one of the top ten banks and is intrinsically important to the functioning of the global banking system. As such, this is one of the lowest risk activities in this sector, a factor that I believe could come in handy if we see further turmoil in the financial sector before the end of the year.
That’s not a prediction, but more of an increasing probability that I’m keeping an eye on. Personally, I think this is a top Canadian bank that is poised to outperform in such an environment, which is why I will continue to push this name.
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