Canadian stocks achieve a record for records in a ‘jaw-dropping’ year

When looking back from early April, it seems rather unexpected that Canadian equities are ending what could be their second-best year of this century.

Donald Trump had just imposed the harshest tariffs since the Great Depression, effectively disrupting trade and scrapping a trade agreement he had negotiated. The US president was also openly talking about annexing Canada, causing unfathomable tensions between the two long-time allies. Political turmoil further added to the unease in the north.

Then Trump backed off from his most severe tariffs. Technocrat Mark Carney took over as prime minister, calming financial market jitters and reducing tensions with his US counterpart. And it turned out that Canada’s economy, driven by miners and internationally renowned financial firms, was well-positioned for the chaos of Trump’s new world order.

The S&P/TSX soared by more than 40% from its April 8 low, on course to end 2025 with a 29% increase, trailing only 2009’s 31% gain as the best ever. The index reached a record 63 new all-time highs along the way, due to a steady rise over the final seven months of the year.

Miner and bank stocks have been crucial 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 favorites like Inc. and Celestica Inc. have also contributed, pushing the index up by a combined 11% during the year.

“The numbers themselves are somewhat astonishing,” said IG Wealth Management chief investment strategist Philip Petursson by phone. “But, I mean, you could say this is still a well-balanced market that has more room to grow in 2026.”

The impetus for the rally that propelled precious metals to new records might not be exhausted. Three Federal Reserve rate cuts were beneficial to an asset class that doesn’t pay interest. The US central bank is expected to cut rates twice in 2026.

Gold and silver also served as a safe haven for traders worried about uncertainties surrounding US trade policies and geopolitical tensions in Europe and the Middle East. Neither of these concerns has been completely resolved.

Petursson said he anticipates more room for gold prices to continue supporting the S&P/TSX Composite index, but not to the same extent as in the past year.

“It would be silly to simply project this year’s gains into 2026,” he said, noting that “the fundamentals are still there” as central banks are expected to continue cutting rates.

Canada’s Big Six banks, including Toronto-Dominion and, posted over the year, with the annual adjusted earnings exceeding Bloomberg consensus expectations by an average of 2 percentage points.

The group of financial firms, including insurers and smaller banks, accounts for 33% of the Canadian index. They too have benefited from lower rates in both the US and Canada, along with profits from dealmaking and a better quality of loans that required fewer provisions. The Canadian group’s advance was nearly double that of its US counterparts.

There is some worry about the group’s performance as 2026 approaches. Bank valuations have been high at the same time that the Canadian economy might be starting to feel the impact of higher tariffs, said Craig Basinger, Purpose Investments chief market strategist.

“Gold, energy: those sectors really aren’t affected by the Canadian economy, but the banks probably should be,” Basinger said. “And this doesn’t seem like the right time to be paying a premium valuation for Canadian banks.”

The S&P/TSX Composite banking subindex’s price-to-earnings ratio reached nearly 15, up from a low of 9.7 in 2022.

The Canadian index’s record was achieved despite one of the worst years for crude oil prices in recent memory. However, the outlook for oil remains weak at best. Basinger said that investing in oil and gas stocks at the start of the year would be a very contrarian move considering how demand is struggling to keep up with supply.

The market would also be vulnerable to any problems in the precious metals markets. Already, silver is declining towards the end of the year, though still on track for a record gain.

Bassinger’s firm took a partial underweight position in the S&P/TSX Composite in the fourth quarter, which he said was more about taking profits after “three consecutive years of substantial gains” rather than having any negative view of the index.

If the new year brings positive surprises for oil, then strategists like Petursson say the S&P/TSX Composite is a great way for foreign investors to capitalize on the energy trend. For Petursson, the answer to the question of whether investors can succeed in investing their money outside the US is “yes”, and there are great options in other markets like Canada, Asia, and Europe.

“When foreign investors are looking for areas of opportunity, if the TSX wasn’t on their radar, I think it should be now,” Petursson said.