The Canadian equities market witnessed strong bullish sentiments in the last few months as easing monetary policy and gradually cooling inflation have led to renewed buying in several sectors. While this market rally has encouraged many to jump in, some conservative investors may still be wondering if it’s too late to safely enter the market. Fortunately, there are still ways to participate in this upward trend without taking excessive risks, especially if you follow the Foolish Investing Philosophy and take a long-term approach.
In this article, let’s look at how Canadians can safely enter a bullish market, with tips on which sectors and stocks are worth considering for steady, sustainable growth in the long run.
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Here’s how you can safely enter this bullish market
While there could be several different ways of benefiting from the ongoing TSX rally, it mainly depends on your risk appetite and time horizon. If you’re willing to take on moderate risk, sectors like technology and financials currently present exciting growth opportunities amid climbing interest rates and rising economic optimism. After rallying by 8.1% last year, the TSX Composite has already jumped by over 17% this year so far, due mainly to renewed buying in industries that thrive in favourable economic conditions, including tech and financials.
Let me explain that with a quick example from the Canadian tech sector. Shares of Descartes Systems (TSX:DSG) are continuing to outperform the broader market in 2024. Currently trading at $146.54 per share with around 32% year-to-date gains, this Waterloo-based software company has a market cap of $12.5 billion. If you don’t know it already, Descartes mainly focuses on offering cutting-edge software for logistics and supply chain management, a sector that has experienced rapid digital transformation in the post-pandemic era.
Despite the ongoing macroeconomic challenges, Descartes has managed to maintain strong top-line growth trends. In the quarter ended in June 2024, the software firm’s total revenue rose by around 14% YoY (year over year) to $163.4 million with the help of strong service revenues. To accelerate its financial growth further, the company continues to focus on its acquisition strategy. For instance, in the last two months alone, Descartes has announced two acquisitions, including MyCarrierPortal and Sellercloud, which brighten its long-term growth outlook.
A more conservative approach
If you are not even willing to take moderate risk, you can still capitalize on the market’s upward trend by investing in stable, dividend-paying stocks within defensive sectors like utilities. Interestingly, the demand for utilities largely remains consistent regardless of temporary economic cycles.
For example, Capital Power (TSX:CPX), the Edmonton-headquartered power producer, is the top-performing TSX Composite component from the utility sector in 2024. Its shares have inched up by around 35% year to date to currently trade at $50.95 per share with a market cap of $6.6 billion. At this market price, CPX stock also offers an attractive 5.1% annualized dividend yield.
While Capital Power’s consistent dividend and stability make it attractive to conservative investors, its ambitious transition away from coal further strengthens its long-term growth outlook. Considering that, this safe, dividend-paying stock could help you get steady returns and benefit from the rising demand for green energy.
