Why Canadian stocks could be in a sweet spot as markets churn higher

Core Viewpoint - Canadian equities are well-positioned to keep pace with U.S. markets, with an earnings recovery expected to lead to double-digit growth in profitability [1] Group 1: Market Outlook - Canadian stocks are at the tail end of an earnings recovery that began in mid-2024 [1] - Profitability normalization is anticipated, with growth projected to reach double digits [1] - Despite narrowing valuation divergence between Canada and the U.S., the Canadian small-cap universe is considered undervalued and underinvested [1] Group 2: Investment Recommendations - Investors are encouraged to stay the course and view potential market weaknesses as buying opportunities [1] - BMO analysts have added new names across various sectors, including energy, health care, real estate, and utilities [1] - The updated "best of" list for financials includes Canadian Imperial Bank of Commerce, Cincinnati Financial Corp., Goeasy Ltd., Manulife Financial Corp., and TransUnion [1] Group 3: Market Dynamics - U.S. stock gains are now more broadly spread beyond the Magnificent Seven, indicating a shift in market dynamics [1] - Opportunities are identified in small- and medium-cap names, suggesting a favorable environment for these segments [1]