The S&P/TSX Index has been on a remarkable run in 2025 — up 21% year to date and an impressive 94% over the past five years. That’s nearly a doubling of the market, translating into substantial wealth creation for investors who have stayed the course.
However, the key question now is what to do next. Should investors take profits and move to the sidelines, or continue adding to their positions?
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Adjusting Portfolio Exposure
After such a strong rally, the TSX Index recently closed near record highs at 30,186. While this performance is encouraging, it also warrants caution. Valuations across several sectors appear stretched, and macroeconomic risks remain. Prime Minister Mark Carney has repeatedly highlighted growing trade tensions with the United States and emerging cracks in Canada’s economic foundation.
Given these dynamics, it may be prudent for investors to reassess portfolio allocations. Some investors are trimming equity exposure in favor of fixed income, aiming to protect gains while maintaining balanced exposure. While a short-term correction appears possible, opportunities still exist for those positioned in the right sectors and companies.
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Focusing on Value and Essentials
Attractive opportunities continue to emerge in undervalued and essential businesses. For instance, Cineplex Inc. (TSX:CGX) — Canada’s leading entertainment company — trades at appealing valuations after a period of low investor expectations. The company’s latest quarter showed strong momentum, with revenue up 30% to $361.8 million and operating cash flow more than doubling to $44 million. Cineplex is also repurchasing shares, signaling management’s confidence in long-term value.
On the defensive side, Fortis Inc. (TSX:FTS) remains a cornerstone utility for stable dividends and consistent earnings. The stock has climbed 21% this year while maintaining a 3.4% dividend yield. Fortis continues to benefit from rate base expansion, infrastructure upgrades, and growing demand from electrification and data centers.
The Bottom Line
While it may be wise to moderate risk following the TSX’s powerful rally, maintaining exposure to high-quality, undervalued, and essential businesses remains key. A short-term pullback could create attractive entry points, setting the stage for renewed long-term growth in the Canadian market.
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