Welcome to the first edition of ETF Insights for 2026!
2025 was a heck of a year for the markets. The TSX topped both the S&P 500 and the NASDAQ by a wide margin. Precious metals surged. Canadian Banks absolutely crushed it. AI remained a key focus.
There are a lot of “themes” regarding the markets in 2026, and in this newsletter I’m going to dive deep into 3 funds that could potentially see some continued attention.
These aren’t your typical AI/datacenter/utility ETFs. That is where everyone is looking right now. Instead, these will more so focus on areas of the market that might have been overlooked.
Without further ado, let’s dive into it.
Why Market Trends in 2026 Could Favor These 3 ETFs
The macro backdrop for 2026 is messy. Arguably one of the messiest we’ve seen in a while. Growth forecasts lean toward a soft landing in the US instead of a recession, which usually favors stocks.
For Canada, our economy is shrinking, with the latest GDP print showing the biggest year-over-year GDP decline in the last 3 years. Yet, our index surged by 30% in 2025.
Sure, one could say precious metals was a big part of this. However, one overlooked sector was financials. And what do financials need? They generally need a strong economy to flourish.
So, it’s no doubt a bit confusing right now. If we were completely blind to market returns and only had economic data to look at, the vast majority of investors would have predicted the market would have been down in 2025.
However, there were some areas of the market that struggled in 2025, or, if they didn’t struggle, valuations and outlooks remain relatively bullish.
In my opinion, those 3 areas are:
- Blue-chip Canadian Stocks
- Software companies
- Infrastructure
These funds are strong considerations for satellite holdings in a core portfolio. One could argue ZLB is diverse and strong enough to make up one’s entire Canadian exposure, and I would tend to agree. However, the other two are more appropriately used for smaller positions to complement a diverse portfolio.
BMO Low Volatility Canadian Equity ETF (ZLB)
One could probably look at the chart above and think I am crazy for saying that ZLB “struggled” in 2025. However, as we should be doing with all our investments, it is important to compare them to a benchmark. If you owned the entire index, you outperformed ZLB by a pretty wide margin in 2025.
Why? ZLB is a defensive play on Canadian equities that filters for low-beta stocks. These are companies that usually move less than the broader market.
When we think of companies that are not low beta, we can think of commodity-based companies (oil companies, precious metal miners, etc). ZLB does not include any of these because they swing wildly in price.
So, why ZLB in 2026? After two straight years of underperformance, what could cause it to outperform?
I would argue that 2025 was a year of “growth at any cost.” 2026 is shaping up to be a year of “growth where you can find it safely.”
In July 2026, there is a mandatory review of the USMCA. The commentary from the United States gives me the impression that it will be anything but “business as usual.” Tariffs remain a huge concern in 2026.
Because the fund is overweight in Consumer Staples (up to 23.6%) and Utilities (up to 16.5%), you are invested in companies that provide essential services to Canadians. A tariff on auto parts doesn’t stop a family in Ontario from buying groceries at Loblaw or turning on the lights and placing demand on Fortis.
In addition to this, gold has had a heck of a run. But so too have gold producers. If we see any sort of pressure on gold prices in 2026, miners will feel some heat, as valuations are high.
As always, I view ZLB as one of the best opportunities for long-term exposure to the index, while avoiding sectors that really don’t bring with them strong long-term returns. Some may think I’m crazy for saying this regarding gold. However, during this run, it’s easy to forget that gold and the majority of gold miners were effectively dead money for nearly 13 years.
iShares Expanded Tech-Software Sector ETF (IGV)
This fund is an interesting one and will likely draw the most attention in this newsletter. It is the definition of contrarian play.
I’m actually surprised at how well this fund did considering the pressure on a lot of software plays in 2025. However, it did trail both the S&P 500 and the NASDAQ by large margins.
This fund tracks North American software companies, plus some other notable names. It holds 115 positions, with Microsoft, Oracle, Adobe, and Salesforce at the top.
I’m not going to focus too much on the Microsofts and Oracles, but instead I will focus on the Adobes, Salesforces, Inuits, Service Nows, etc.
I would call these companies the “anti-AI” plays in 2026. Meaning, while money is pouring into companies that are making new AI developments, money is flowing out of companies that are expected or speculated to be disrupted by AI.
The market has spent two years calling these companies “AI losers,” fearing that generative AI would cannibalize the businesses. But as we enter 2026, we are seeing a “SaaS renaissance” as these giants move from being passive tools to AI-fueled tools.
For example, having successfully launched Agentforce, Salesforce is now monetizing AI at scale. They hit $1.2 billion in ARR for their Data Cloud and Agentic platforms, growing 120% YoY.
On Adobe’s side, triple-digit growth in generative credit consumption proves that users are willing to pay for “credits” to use Firefly and Acrobat AI. Adobe is targeting double-digit ARR growth in 2026, despite its share price losing 25% in 2025.
AI-related sentiment is through the roof. It makes complete sense that for companies that could potentially be disrupted by AI, sentiment is in the basement. However, I do believe that this is overblown.
So, this fund is perfect for those who believe that software stocks will see a resurgence in 2026.
And the best part is, it isn’t solely struggling SaaS stocks. That is a decent portion, but IGV’s holdings are at almost every layer of that stack. We have plenty of booming names. Microsoft, Oracle, Palantir, etc.
For many SaaS names, 2026 looks like a better entry point than 2021 or early 2022, when valuations were stretched and expectations were sky-high. Sure, there is more potential disruption at this point. But I do believe it’s priced in.
If you believe software is still the backbone of digital infrastructure and that AI adoption is just getting started, this fund gives you focused exposure to the best-positioned companies.
Just don’t expect a smooth ride.
iShares Global Infrastructure Index ETF (CIF.TO)
Unfortunately, we don’t have a large enough infrastructure base here in Canada to solely have a Canadian infrastructure ETF. However, it is fairly easy to be just as bullish on the global scene.
CIF gives Canadian investors exposure to companies building and running essential infrastructure across developed countries.
The fund holds utilities, energy grids, transportation networks, and other long-duration assets. Make no mistake, this isn’t some quick momentum play. This is a thesis that will span a decade or longer. The momentum won’t be fast, but it will certainly be consistent, much like it was in 2025.
Infrastructure spending is picking up around the world. Governments keep pouring capital into decarbonization projects, renewable energy buildouts, and replacing ageing public infrastructure.
This creates a multi-year tailwind for the companies CIF.TO holds. These aren’t high-flying tech names. They’re businesses that sign decade-long contracts, collect steady fees, and often have pricing power when inflation spikes.
It contains some of the best infrastructure companies in Canada, like Atco, Capital Power, Stantec, Keyera, Gibson, Transalta, AtkinsRealis, etc.
The fund’s utilities-heavy exposure makes it lean defensive. However, there is a unique spin here. Utilities offer levels of growth we haven’t witnessed in quite some time, especially independent power producers like Capital Power.
I think, in light of extensive power demand globally, regulations will be eased and timelines sped up for utility companies. After all, the International Energy Agency (IEA) forecasts that electricity demand from AI data centers could grow 10x by 2026 compared to 2023 levels.
We have a large amount of power ready to be brought online, but the process of getting the grid built has been so tedious that power simply sits idle. In 2026, the power race is forcing governments to slash red tape, which is good for utilities.
The payoff isn’t huge, but there is a tradeoff here. Instead of aiming for explosive growth via AI names, you’re getting long-term assets that provide consistent returns. That AI name that went up 120% last year? It could easily have a year where it shrinks by 40%, 50%, or even 60%+. You just won’t get that with these slower-growing infrastructure plays.
While CIF is global, it maintains a large 34.3% allocation to Canadian equities, allowing you to own the domestic companies along with international.
Looking ahead to 2026, the clean energy transition, along with AI, is driving massive spending on renewable power, grid upgrades, and EV charging networks. I don’t see this slowing down at any point, and CIF is certainly a solid option to get exposure.
Putting It All Together
The real opportunity in 2026 probably comes down to matching your risk tolerance with the right exposure.
As I mentioned at the start of this newsletter, ZLB can certainly be an option for Canadian indexing. However, the other two options are more for satellite holdings that complement a core portfolio.
The macro setup for 2026 is confusing, to say the least. We have a U.S. economy that is decelerating but staying afloat through AI-driven productivity, while the Canadian economy is navigating some considerable difficulties.
So what makes these funds so compelling, in my opinion?
On one end, you have ZLB and CIF. These funds provide the defensive moat. Between ZLB’s focus on recession-resistant grocers and utilities and CIF’s exposure to the global power race, you are somewhat protected against the inevitable volatility that will come when tariff discussions spark back up again.
Don’t get me wrong, these funds would likely still see price declines in the event that the markets correct. But, I wouldn’t expect them to fall as much as the broader indexes.
On the other end, you have IGV. This is the contrarian play. While the market spent 2025 obsessing over hardware and chips, software companies were thrown in the dumpster. Companies like Adobe and Salesforce are proving that they are not AI losers; they are the platforms where AI is being developed to fuel growth.
As always, I am happy to discuss these ETFs or any other options in the Discord, or on the Q&A.
I want to wish everyone a Happy New Year, and we’ll see you in the next edition!
