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 Despair, successfully choking off commerce and tearing up a commerce settlement he had negotiated. The US president was additionally overtly 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 along with his US counterpart. And, it turned out, Canada’s financial system — pushed by miners and internationally famend monetary companies — 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% acquire for one of the best ever. The index notched a report 63 new all-time highs alongside the best way, owing to a gentle march increased 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% increased through the yr.
“The numbers themselves are somewhat jaw dropping,” mentioned IG Wealth Administration chief funding strategist Philip Petursson by telephone. “But, I mean, you could sit there and say this is still a well-balanced market that has further upside in 2026.”
The gas for the rally that powered valuable metals to new information will not be spent. Three Federal Reserve price cuts have been a boon to an asset class that doesn’t pay curiosity. The US central financial institution is anticipated to chop twice in 2026.
Gold and silver additionally served as a secure haven for merchants frightened about uncertainty round US commerce insurance policies and geopolitical tensions in Europe and the Center East. Neither of these considerations have been laid absolutely 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 previously yr.
“It would be foolish to just extrapolate this year’s gains into 2026,” he mentioned, noting although that “the fundamentals are still there” as central banks are anticipated to proceed reducing charges.
Canada’s Large 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 share factors.
The group monetary companies, 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 may be some concern over the group’s efficiency heading into 2026. Financial institution valuations have been elevated on the identical time that the Canadian financial system could also be beginning to really feel the pressure of upper tariffs, mentioned Craig Basinger, Objective Investments chief market strategist.
“Gold, energy: those sectors really don’t care about the Canadian economy, but the banks probably should,” Basinger mentioned. “And this just doesn’t feel 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 report got here regardless of one of many worst years for crude oil costs in current reminiscence. The issue, although, is the outlook for oil stays muted at finest. Basinger mentioned leaping into oil and gasoline shares at the start of the yr can be a really contrarian transfer given how demand is struggling to maintain up with provide.
The market would even be susceptible to any troubles within the valuable metals markets. Already, silver is sliding into the tip of the yr, although nonetheless on observe for a report acquire.
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 oversized gains” moderately than any detrimental 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 an effective way for international buyers to leverage the vitality play. For Petursson, the reply to the query of whether or not buyers might be profitable placing their cash outdoors of the US is “yes”, and there are nice choices in different markets like Canada, Asia and Europe.
“When foreign investors are looking for pockets of opportunity, if the TSX was not on their radar, I think it is now,” Petursson mentioned.
