Christine Poole’s Top Picks for June 27, 2025

Christine Poole, Co-Chief Investment Officer, Davis Rea

Focus: North American large caps

MARKET OUTLOOK:

This year has been marked by global uncertainty surrounding trade policy and geopolitical conflicts. Financial markets, however, have been remarkably resilient against this destabilizing backdrop. The broad equity indices have recovered from the sharp pullback in April, volatility as measured by the CBOE Volatility Index (VIX) has retrenched, and high yield credit spreads have receded to near historical lows.

While there continues to be a high degree of macroeconomic and policy uncertainty, the price gains since U.S. President Donald Trump’s Liberation Day implies a manageable outcome from tariffs between the United States and its trading partners. Corporate profit growth from the S&P500 companies has been revised down from the start of the year but is still expected to remain positive at 8.4 per cent in 2025.

The fallout of the recent events in the Middle East has been muted so far, and the reaction from financial markets reflect optimism that the conflict is on a de-escalatory trajectory. Oil prices initially spiked up but quickly tumbled to pre-crisis levels following the announcement of the Israel and Iran ceasefire.

Central banks in both Canada and the United States have adopted a wait-and-see approach, choosing to monitor how tariffs will ultimately affect inflation before making further policy decisions. Labour market conditions in the U.S. remain solid with the unemployment rate holding steady at 4.2 per cent. In contract, the Canadian unemployment rate has been rising, hitting seven per cent in May. While trade diversification is a welcome development, a new trade deal with the United States is a crucial step towards supporting the health of export-oriented businesses.

Uncertainty has defined this past year and is expected to persist. Staying focused on the long-term and holding a well-diversified portfolio consisting of financially strong, industry leading companies can provide stability amid unforeseen developments.

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TOP PICKS:

CN Rail (CNR TSX)

CNR is Canada’s largest railway and one of seven Class 1 North American rail companies. Its network spans across North America, connecting the coasts of the Atlantic, the Pacific and the Gulf of Mexico. CNR’s freight revenues are derived from a diversified mix of natural resources, manufactured products and finished goods. CNR maintains a strong balance sheet and has increased its dividend every year since going public in 1995. CNR provides a dividend yield of 2.5 per cent.

Fortis (FTS TSX)

Fortis is a North American electric and gas utility company, generating its cash flow from regulated assets with over half its revenues from the United States. Fortis is a stable cash flow generator, with highly visible and defensive cash flows from operations. Supported by a backlog of low-risk, regulated projects and cleaner energy initiatives, Fortis affirms an average annual dividend growth rate of 4% to 6% through 2029. Fortis has increased its dividend for 51 consecutive years and provides a dividend yield of 3.8 per cent.

Xylem (XYL NYSE)

Xylem is a pure play in the water technology industry, providing water equipment and services for water and wastewater applications. Applications include delivery, treatment, measurement and use of drinking water, and the collection, testing, analysis and treatment of wastewater. Xylem provides exposure to secular growth drivers, including water scarcity, aging global water infrastructure and PFAS mitigation efforts. Xylem offers a dividend yield of 1.3 per cent.

PAST PICKS: Feb. 13 2024

Brookfield Renewable Partners (BEP-U TSX)

Then: $35.19

Now: $35.25

Return: 0.17%

Total Return: 6%

Home Depot (HD NYSE)

Then: US$347.88

Now: US$365.51

Return: 5%

Total Return: 8%

S&P Global (SPGI NASD)

Then: US$437.19

Now: US$518.99

Return: 19%

Total Return: 20%

Total Return Average: 11%