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It makes little sense, when viewed from early April, that Canadian equities are closing out their second-best year this century.\u00a0<\/p>\n
Donald Trump had just unleashed the harshest tariffs since The Depression, effectively choking off trade and tearing up a trade agreement he had negotiated. The US president was also openly discussing annexing Canada, stoking unfathomable tensions between the two long-time allies. Political turmoil added to unease up North.<\/p>\n
Then Trump backed down from his most punishing tariffs. Technocrat Mark Carney took over as prime minister, easing financial market jitters and cooling tensions with his US counterpart. And, it turned out, Canada\u2019s economy \u2014 driven by miners and internationally renowned financial firms \u2014 \u00a0was perfectly situated for the chaos of Trump\u2019s new world order.<\/p>\n
The S&P\/TSX soared more than 40% from an April 8 low, putting the gauge on track to end 2025 with a 29% advance, trailing only 2009\u2019s 31% gain for the best ever. The index notched a record 63 new all-time highs along the way, owing to a steady march higher over the year\u2019s final seven months.<\/p>\n
Miner and bank stocks have been central to the rally, with the materials subindex doubling on the back of rallies in gold, silver, copper and palladium. The financials group jumped 40%. Tech darlings like Shopify Inc. and Celestica Inc. have also contributed, moving the index by a combined 11% higher during the year.\u00a0<\/p>\n
\u201cThe numbers themselves are somewhat jaw dropping,\u201d said IG Wealth Management chief investment strategist Philip Petursson by phone. \u201cBut, I mean, you could sit there and say this is still a well-balanced market that has further upside in 2026.\u201d<\/p>\n
The fuel for the rally that powered precious metals to new records may not be spent. Three Federal Reserve rate cuts were a boon to an asset class that doesn\u2019t pay interest. The US central bank is expected to cut twice in 2026.\u00a0<\/p>\n
Gold and silver also served as a safe haven for traders worried about uncertainty around US trade policies and geopolitical tensions in Europe and the Middle East. Neither of those concerns have been laid fully to rest.<\/p>\n
Petursson said he sees further runway for gold prices to continue supporting the S&P\/TSX Composite index, but not to the same degree the markets have seen in the past year.\u00a0<\/p>\n
\u201cIt would be foolish to just extrapolate this year\u2019s gains into 2026,\u201d he said, noting though that \u201cthe fundamentals are still there\u201d as central banks are expected to continue cutting rates.\u00a0<\/p>\n
Canada\u2019s Big Six banks, including Toronto-Dominion and Bank of Montreal, posted\u00a0stronger profits than expected\u00a0over the year with the annual adjusted earnings coming ahead of Bloomberg consensus expectations by an average of 2 percentage points.<\/p>\n
The group financial firms, including insurers and smaller banks, accounts for 33% of the Canadian index. They, too, have enjoyed lower rates in both the US and Canada, along with profits from dealmaking and a better batch of loans that required fewer set-asides. The Canadian group\u2019s advance nearly doubled that of its US counterparts.<\/p>\n
There is some concern over the group\u2019s performance heading into 2026. Bank valuations have been elevated at the same time that the Canadian economy may be starting to feel the strain of higher tariffs, said Craig Basinger, Purpose Investments chief market strategist.\u00a0<\/p>\n
\u201cGold, energy: those sectors really don\u2019t care about the Canadian economy, but the banks probably should,\u201d Basinger said. \u201cAnd this just doesn\u2019t feel like the time to be paying a premium valuation for Canadian banks.\u201d<\/p>\n
The S&P\/TSX Composite banking subindex\u2019s price to earnings ratio reached nearly 15, up from a low of 9.7 in 2022.\u00a0<\/p>\n
The Canadian index\u2019s record came despite one of the worst years for crude oil prices in recent memory. The problem, though, is the outlook for oil remains muted at best. Basinger said jumping into oil and gas stocks at the beginning of the year would be a very contrarian move given how demand is struggling to keep up with supply.\u00a0<\/p>\n
The market would also be vulnerable to any troubles in the precious metals markets. Already, silver is sliding into the end of the year, though still on track for a record gain.<\/p>\n
Bassinger\u2019s firm took a partial underweight position in S&P\/TSX Composite in the fourth quarter, which he said was more about profit-taking after \u201cthree consecutive years of oversized gains\u201d rather than any negative view of the index. \u00a0\u00a0<\/p>\n
If the new year brings upside surprises to oil, then strategists like Petursson say the S&P\/TSX Composite is a great way for foreign investors to leverage the energy play. For Petursson, the answer to the question of whether investors can be successful putting their money outside of the US is \u201cyes\u201d, and there are great options in other markets like Canada, Asia and Europe.\u00a0<\/p>\n
\u201cWhen foreign investors are looking for pockets of opportunity, if the TSX was not on their radar, I think it is now,\u201d Petursson said.\u00a0<\/p>\n<\/div>\n
#Canadian #stocks #set #record #records #jawdropping #year<\/p>\n","protected":false},"excerpt":{"rendered":"
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