Canadian and U.S. equities continue to benefit from resilient economic growth, but investors are navigating renewed geopolitical risks, elevated valuations and uncertainty around the path for interest rates.
BNN Bloomberg spoke with Paul Harris, portfolio manager at Harris Douglas Asset Management, about the outlook for equities, why energy prices remain the biggest macro risk, and why he continues to favour select Canadian and U.S. companies despite elevated valuations.
Key Takeaways
- Energy prices remain the biggest swing factor for inflation and equity markets as tensions in the Middle East continue.
- Higher-for-longer interest rates could pressure richly valued technology stocks as investors look for stronger returns on AI spending.
- Canadian banks remain attractive long-term holdings, but elevated valuations warrant caution when adding new money.
- Companies with durable cash flows and disciplined capital allocation are better positioned to navigate economic uncertainty.
- The portfolio manager favours FirstService, Alimentation Couche-Tard and Costco for their resilient business models and long-term growth potential.
Read the full transcript below:
LINDSAY: Nasdaq futures are trading higher this morning as investors assess tensions between the U.S. and Iran. The U.S. military hit about 90 Iranian targets on Wednesday to impair Iran’s ability to attack commercial shipping in the Strait of Hormuz. Our next guest expects strong growth to continue in the U.S. However, energy prices and the conflict in the Middle East remain a key swing factor. Joining us now is Paul Harris, portfolio manager at Harris Douglas Asset Management. Great to have you join us. Good morning.
PAUL: Good morning.
LINDSAY: So, let’s talk about that first. You’re expecting growth to stay solid in the U.S., but you expect energy prices and the conflict in the Middle East to be a key swing factor. With that in mind, how are you factoring that risk into your portfolio strategy right now?
PAUL: Right. So, I think one of the big issues between Canada and the United States, obviously, is that the U.S. has sort of dropped growth rates slightly, but that also increased their inflation numbers, and then unemployment has sort of been level. Canada is slightly different. This is the first time between Canada and the United States you’ve seen such a widespread rate difference, 50- or 55-basis-point difference between the rates. So, I think we’re living in two different worlds between Canada and the United States. That’s one thing.
But the other thing is, I think the energy issue, because of this tit for tat going on constantly, is so much more volatile. So, I think that if inflation sort of feeds through, as your previous guest was just talking about, feeds through to the consumer, it has much more impact. I think rates will stay higher for longer in the United States. I think most economists believe that you’re going to get at least one increase in rates over the next six months. So, I think that has an impact on how people will kind of move their portfolios around.
I think if you’re looking at energy, you’ve got to be very careful at these levels because I think the stocks are going to be very volatile. Yesterday oil was up. It could be down. So, I think you have to be very careful. I think you have to buy some really great Canadian companies like CNQ, something that we own. I think you can buy a great company like that, which will continue to have very good cash flows even if oil falls back to its previous pre-war level. So, I think if you’re in the energy sector, you want to be owning these kind of bigger companies that make a difference from a long-term perspective.
LINDSAY: When it comes to the tech sector, though, with high valuations and a lot of these mega-caps facing massive AI capex bills, how vulnerable are markets if the Fed continues to hold or even hike interest rates?
PAUL: Right. So, I think the issue for these companies is very simple. They’ve gone from what you’re, you know, from a capital-A business to maybe much more fixed-cost business. On the data centres, I think people have to reassess how much they’re spending and how much of that spend will generate a bunch of revenue. I think that’s really hard for most people to figure out right now.
In Meta, for example, you can see that AI is helping them generate a lot more revenue on the advertising side, and the same thing with Amazon on their advertising business. But the issue becomes that someone like Meta, who does not have a cloud business, can’t rent out extra space to somebody else. So, it’s a very difficult thing. They’re all spending a ton of money.
I think you have to be very cautious about whether you’re seeing some generation of revenue from those businesses. If that actual timeline gets pushed out even further, I think it’s going to be hard for these stocks to stay at these valuations.
LINDSAY: I want to switch gears and talk about Canadian banks as well. Why do you like Canadian banks right now? Would you put new money into them at these high valuations?
PAUL: Right. So, I like Canadian banks. We own a bunch of them. They’ve certainly done very well this year, even though I think a lot of people weren’t expecting that to happen. But they’re trading at very high valuations.
So, if you’re going to put more money to work, I think you have to be very careful at these levels. When a Canadian bank starts to trade close to three times book, I think it’s getting to the very high end of that valuation range.
I’d be very cautious about buying banks. We still hold them, but if you’re going to be putting more money to work, I think you have to be very careful as they start to get to those high multiples. In fact, there are U.S. banks trading at substantially lower multiples than Canadian banks today, and they may be a better place to put your money.
If you have a very long-term view on the banking industry in Canada, which we do, we continue to hold them. But if you’re going to put more money to work, I think you have to be much more cautious about the levels you’re buying them at.
LINDSAY: Okay, let’s get to your stock picks before we run out of time. You’ve got three. The first one is FirstService. Tell us more about why you like FirstService. We know they’re about to announce second-quarter results later this month, so what do you like about them? What are you watching for?
PAUL: Well, FirstService is a very unique company. They have two businesses. They have a property management business and a franchise business like Paul Davis or California Closets.
The property management business is sort of an annuity. When you sign a deal, you don’t do it for a month or a year. You do it for several years. As inflation impacts pricing, they’ve also done ongoing acquisitions, which have built up the business.
The stock has fallen a lot. It’s never really been a cheap stock, but it has fallen. So, I think it’s a great opportunity to buy the company at these levels.
LINDSAY: Couche-Tard is another one. This company has gone through some changes recently when it comes to some of its leadership in North America. Tell us what you like about Alimentation Couche-Tard.
PAUL: Well, I think Couche-Tard was trying to do too much with the 7-Eleven deal, and I think that’s off the table, which is great. Management can now concentrate on its core business.
I think they can still do acquisitions. Maybe not as large an acquisition as they were planning a while ago, but they can continue to do acquisitions. They’ve been very good. It’s a story that’s grown through acquisitions, but unlike many companies that grow that way, they’re very good at it.
They take on debt, pay down their debt and integrate everything. They’re very good at doing acquisitions. I think they were taking too large a step with 7-Eleven, and it was in Japan, which makes any acquisition very difficult.
I think there’s a lot of room for them to continue doing acquisitions. They can concentrate on improving returns from their existing businesses and look for the right acquisition within North America to grow the business.
LINDSAY: Lastly, Costco. I wonder whether, with some of these companies, we’re going to see the story we’ve been seeing with Pepsi today, where consumers are starting to pull back. But you like Costco. Tell us why.
PAUL: Well, Costco, first of all, makes a lot of money just on membership renewals, which is a huge part of the business. They’re an incredibly well-run company. They care about costs, but they’ve really developed a great franchise and a great brand.
I don’t like going into them, but when you look at the parking lots, they’re jammed every day with people buying their stuff. Their Kirkland products are very, very good.
If you have a consumer who’s dealing with inflation and has less money to spend, Costco is the perfect place to buy groceries and a lot of other things. Even books are cheaper there. They offer their customers much lower prices, the quality is very high, and Costco has developed a great process by which they do that.
You can see that in their same-store sales on an ongoing basis. Sometimes people focus on whether they missed one quarter or another. That’s not relevant to me. In the greater scheme of things, they’re an incredibly well-run company and very competitive. Their online business has also gotten better and better. You’re buying a great business. You’ll pay a higher valuation for that business, but it’s a great company.
LINDSAY: Okay, Paul Harris, we’ve got to leave it there. Paul Harris is a portfolio manager at Harris Douglas Asset Management. Appreciate your time, as always. Thank you.
PAUL: Thank you.
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This BNN Bloomberg summary and transcript of the July 9, 2026 interview with Paul Harris are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
