Some of Canada’s most ‘boring’ stocks outperformed America’s big tech giants.
Between February 2025 and February 2026, Canadian financial, utility and energy stocks rose 29%, 19.4% and 26% respectively. During the same period, the US was technology heavy NASDAQ-100 index gained only 12.7% while paying much lower dividends than the TSX stocks just mentioned!
It has been a period of remarkable strength for Canada’s dullest industries. Not only are they performing well compared to expectations and their own past performance, they are also beating the most talked about and hyped stocks in the world.
What drives profits
The outperformance of ‘boring’ Canadian shares has been a long time coming. Traditional industries have always functioned reasonably well in Canada. For decades, Canadian banks and energy companies have outperformed Canadian technology. However, non-tech TSX stocks far underperformed US technology for the longest time. It’s only recently that Canadian names have started to beat even the most elite American players.
The question is: what drives this? We normally expect riskier stocks to outperform less risky stocks, and technology stocks have historically been quite volatile. Therefore, the behavior observed in North American markets over the past year was unusual. We must understand it before we can conclude that it will continue to exist.
The recent outperformance of Canadian non-tech stocks has been driven by two key factors:
- Cheap valuations.
- A perceived increase in the risk of US assets.
The cheap valuation factor is simple enough to explain. At the start of 2025, Canadian banks and energy companies traded at low price-to-earnings ratios on average, while Canadian utilities traded on average 20 times earnings. At the same time, the NASDAQ-100 traded at a weighted average price-to-earnings ratio of about 35, while the “Magnificent Seven” averaged more than 40 times earnings. It’s not surprising that Canadian value stocks are beating U.S. tech stocks in light of the valuation gap, especially since companies like Apple And Tesla are no longer growth stocks, despite their growth stock valuation.
Another factor behind the relative underperformance of US technology over the past twelve months has been the perceived increase in risk of US assets. Donald Trump’s second administration was controversial; Trump’s tariff policy in particular is seen as increasing tensions between the US and other countries. In the first few months of Trump’s administration, tariff increases on more than a hundred countries and a trade war with China resulted in a dramatic sell-off of US assets. Although markets rallied as Trump rolled back tariffs, lingering fears of future tensions have likely held back yields.
One non-tech stock that really thrived
One non-technical TSX stock that has really been flourishing lately is Toronto Dominion Bank (TSX:TD). TD Bank gained 71% last year and had a total return of 76% including dividends. It started the year extremely cheap, trading at less than 10 times earnings. When tech stocks crashed in the first part of 2025, TD posted solid gains. Later in the year, as US technology began to recover, TD continued to rise, ending the year with significant outperformance. It was a great achievement for the ‘boring’ Canadian bank, and a perfect case study of how flashier isn’t always better.
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