Canada’s TSX index hit 63 all-time highs in 2025, closing the year up 29%, its second-best performance since 2000

Canada closed 2025 with a stock market performance that looked impossible just months earlier. The S&P/TSX Composite Index finished the year with a 29% gain, the second‑best annual result this century.

Only 2009, when the index jumped 31%, delivered a stronger finish. The benchmark logged 63 separate all‑time highs, most of them packed into the final seven months of the year.

Looking back to early April, the setup looked ugly. Donald Trump, still sitting president in 2025, rolled out the harshest tariffs seen since The Depression. Trade slowed fast. A trade deal he once negotiated was effectively torn up.

Trump openly talked about annexing Canada. Political tension spiked. Markets north of the border felt it immediately.

Markets reverse course after tariffs ease and leadership shifts

Then the pressure cracked. Trump stepped back from his most damaging tariffs. Mark Carney, a technocrat with deep financial roots, took over as prime minister. Market stress cooled. Tensions with Washington eased.

What followed surprised almost everyone. Canada’s economy, powered by miners and global financial firms, fit neatly into the disorder of Trump’s trade world.

From an April 8 low, the S&P/TSX surged more than 40%. The climb was steady, not frantic. Over seven straight months, the index kept pushing higher. By year‑end, the math was locked. A 29% annual gain. Sixty‑three records. A historic run.

The rally leaned hard on miners and banks. The materials subindex doubled, lifted by strong moves in gold, silver, copper, and palladium.

The financials sector jumped 40%. Technology also pulled weight. Shopify and Celestica together added 11% to the index’s advance. No single sector carried the load alone.

Philip Petursson, chief investment strategist at IG Wealth Management, summed up the scale of the move. “The numbers themselves are somewhat jaw-dropping,” Philip said by phone. “But you could still argue this is a balanced market with room left in 2026.”

Rate cuts played a major role. The Federal Reserve cut rates three times in 2025. Assets that pay no interest benefit. The central bank is expected to cut twice more in 2026. Precious metals reacted fast. Gold and silver hit fresh records. They also drew demand from traders worried about trade policy and conflicts in Europe and the Middle East.

Philip said metals could keep supporting the TSX next year, though at a slower pace. “It would be foolish to just extrapolate this year’s gains into 2026,” he said. “The fundamentals are still there.”

Banks dominate gains while oil and valuations raise flags

Banks were the backbone of the rally. Canada’s Big Six, including Toronto‑Dominion and Bank of Montreal, beat profit forecasts. Annual adjusted earnings topped Bloomberg consensus by an average of 2 percentage points. Lower rates helped. Deal activity helped. Loan books improved, with fewer reserves set aside.

The financial group, which includes insurers and smaller lenders, makes up 33% of the index. Their advance nearly doubled gains posted by U.S. peers. Lower rates in both the U.S. and Canada fed momentum across the group.

Still, caution is creeping in. Craig Basinger, chief market strategist at Purpose Investments, flagged stretched valuations as tariffs begin to weigh on the economy.

“Gold and energy do not care about the domestic economy,” Craig said. “Banks probably should. This does not feel like the moment to pay premium prices.”

Canada’s banking subindex now trades near a price‑to‑earnings ratio of 15, up from 9.7 in 2022.

Oil offered no help, as its own index hit records despite one of the worst years for crude prices in memory. Demand lagged supply. Craig said buying oil and gas stocks early in the year would have been a contrarian call. The outlook remains muted.

Philip said the TSX could still attract global capital. If oil surprises to the upside, the index offers leverage. He said investors looking beyond the U.S. are finding real options in Canada, Asia, and Europe. “If the TSX was not on their radar,” Philip said, “it is now.”