U.S. stocks have entered what one Canadian money manager calls “mania territory,” with momentum clustered in a handful of mega-cap winners and pockets of speculative trading.
Rebecca Teltscher, a portfolio manager at Newhaven Asset Management in Toronto, said this week that valuations in the United States look stretched compared with Canada, where multiples remain lower and dividends steadier for patient investors.
FactSet’s latest Earnings Insight pegs the S&P 500’s forward 12-month price-to-earnings ratio at about 22.8, above its five and ten-year averages.
National Bank Financial estimates the S&P/TSX Composite near 17 times forward earnings, a notable discount. The spread reflects different market mixes as much as sentiment.
The U.S. index is dominated by high-growth, high-multiple technology platforms, while the TSX leans toward banks, energy, and utilities that trade on cash flow and yield. Recent prints also underline the exuberance.
The Nasdaq hits new all-time high piece captured the tech-led surge late last month even as breadth narrowed.
Teltscher’s caution comes after a choppy run of macro headlines that did little to dent risk appetite.
Traders shrugged off Washington gridlock that sent Dow futures slip as U.S. shutdown starts, and they looked past uneven economic data while continuing to crowd the same themes.
Goldman Sachs and others argue today’s leaders are far more profitable than dot-com era darlings, yet even bulls concede a lot must go right on earnings to sustain current multiples. That is the essence of mania risk. When expectations sit high, small disappointments can reset prices quickly.
Why Canada screens cheaper
Valuation alone does not make Canada an automatic buy, but the case is straightforward.
The TSX’s heavier exposure to pipelines, power, and telecoms aligns with Teltscher’s focus on infrastructure and dividends, areas that can compound steadily even if growth slows.
Canada also benefits when commodity fundamentals improve. Energy margins can fatten if supply tightness persists, a backdrop echoed in global crude exports on track to hit new record.
By contrast, the U.S. rally is concentrated and sensitive to any wobble in the artificial-intelligence spend cycle.
The Bank of Canada has kept its 2% inflation target at the center of guidance, reinforcing a data-driven approach that favors disinflation over stimulus.
That framework, outlined in Why the Bank of Canada is committed to a 2% inflation goal, supports a slower-for-longer rate glide path that could cushion rate-sensitive Canadian sectors as mortgage resets roll through.
South of the border, a still-resilient consumer and large fiscal deficits keep the Federal Reserve’s timing in play, which can amplify swings in growth stocks priced on long-duration cash flows.
The U.S. offers higher secular growth tied to AI infrastructure and software, which has powered index-level gains and headline milestones.
Canada offers cheaper entry points, higher dividends on average, and sector exposure that can benefit from a re-acceleration in industrial activity and energy infrastructure build-outs.
Mania is a warning label, not a call to sell everything. In her view, lean into quality cash flows and secular infrastructure demand in Canada, and be choosy in the United States where price already embeds perfection.
That mindset echoes the way professional managers often navigate late-cycle enthusiasm: let dividends work, upgrade balance sheets, and avoid paying peak multiples for stories that need flawless execution to keep flying.
The TSX will not stay insulated if the U.S. stumbles, as September’s TSX stalls near a record showed, but the starting valuation gap gives Canadian buyers more room for error.
Sources:
Monthly Equity Monitor – September / October 2025: A trade war with no losers?
