It makes little sense, when seen from early April, that Canadian equities are closing out their second-best yr this century.
Donald Trump had simply unleashed the harshest tariffs since The Melancholy, successfully choking off commerce and tearing up a commerce settlement he had negotiated. The US president was additionally brazenly discussing annexing Canada, stoking unfathomable tensions between the 2 long-time allies. Political turmoil added to unease up North.
Then Trump backed down from his most punishing tariffs. Technocrat Mark Carney took over as prime minister, easing monetary market jitters and cooling tensions together with his US counterpart. And, it turned out, Canada’s economic system — pushed by miners and internationally famend monetary corporations — was completely located for the chaos of Trump’s new world order.
The S&P/TSX soared greater than 40% from an April 8 low, placing the gauge on observe to finish 2025 with a 29% advance, trailing solely 2009’s 31% achieve for the most effective ever. The index notched a file 63 new all-time highs alongside the best way, owing to a gentle march greater over the yr’s last seven months.
Miner and financial institution shares have been central to the rally, with the supplies subindex doubling on the again of rallies in gold, silver, copper and palladium. The financials group jumped 40%. Tech darlings like Shopify Inc. and Celestica Inc. have additionally contributed, shifting the index by a mixed 11% greater in the course of the yr.
“The numbers themselves are considerably jaw dropping,” mentioned IG Wealth Administration chief funding strategist Philip Petursson by cellphone. “However, I imply, you may sit there and say that is nonetheless a well-balanced market that has additional upside in 2026.”
The gasoline for the rally that powered treasured metals to new information is probably not spent. Three Federal Reserve fee cuts had been a boon to an asset class that doesn’t pay curiosity. The US central financial institution is predicted to chop twice in 2026.
Gold and silver additionally served as a protected haven for merchants apprehensive about uncertainty round US commerce insurance policies and geopolitical tensions in Europe and the Center East. Neither of these issues have been laid totally to relaxation.
Petursson mentioned he sees additional runway for gold costs to proceed supporting the S&P/TSX Composite index, however to not the identical diploma the markets have seen prior to now yr.
“It will be silly to simply extrapolate this yr’s positive factors into 2026,” he mentioned, noting although that “the basics are nonetheless there” as central banks are anticipated to proceed slicing charges.
Canada’s Massive Six banks, together with Toronto-Dominion and Financial institution of Montreal, posted stronger earnings than anticipated over the yr with the annual adjusted earnings coming forward of Bloomberg consensus expectations by a mean of two proportion factors.
The group monetary corporations, together with insurers and smaller banks, accounts for 33% of the Canadian index. They, too, have loved decrease charges in each the US and Canada, together with earnings from dealmaking and a greater batch of loans that required fewer set-asides. The Canadian group’s advance practically doubled that of its US counterparts.
There’s some concern over the group’s efficiency heading into 2026. Financial institution valuations have been elevated on the identical time that the Canadian economic system could also be beginning to really feel the pressure of upper tariffs, mentioned Craig Basinger, Function Investments chief market strategist.
“Gold, power: these sectors actually don’t care in regards to the Canadian economic system, however the banks in all probability ought to,” Basinger mentioned. “And this simply doesn’t really feel just like the time to be paying a premium valuation for Canadian banks.”
The S&P/TSX Composite banking subindex’s worth to earnings ratio reached practically 15, up from a low of 9.7 in 2022.
The Canadian index’s file got here regardless of one of many worst years for crude oil costs in latest reminiscence. The issue, although, is the outlook for oil stays muted at finest. Basinger mentioned leaping into oil and gasoline shares in the beginning of the yr can be a really contrarian transfer given how demand is struggling to maintain up with provide.
The market would even be weak to any troubles within the treasured metals markets. Already, silver is sliding into the tip of the yr, although nonetheless on observe for a file achieve.
Bassinger’s agency took a partial underweight place in S&P/TSX Composite within the fourth quarter, which he mentioned was extra about profit-taking after “three consecutive years of outsized positive factors” fairly than any unfavorable view of the index.
If the brand new yr brings upside surprises to grease, then strategists like Petursson say the S&P/TSX Composite is a good way for overseas buyers to leverage the power play. For Petursson, the reply to the query of whether or not buyers may be profitable placing their cash outdoors of the US is “sure”, and there are nice choices in different markets like Canada, Asia and Europe.
“When overseas buyers are in search of pockets of alternative, if the TSX was not on their radar, I feel it’s now,” Petursson mentioned.
