No doubt some Canadian investors were happily eyeing their portfolios yesterday, wondering if they might be able to pull off an early retirement.
What happened: The S&P/TSX Composite Index surpassed 30,000 for the first time in early trading yesterday, before closing the day in the red. Its recent run of good fortune has put its growth ahead of the S&P 500 this year, a rare instance of Bay Street outpacing Wall Street.
Why it’s happening: When Donald Trump slapped tariffs on Canada and the rest of the world in April, the TSX tanked. Since then, a combination of factors has led to an unexpected rally.
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Bargain hunters: TSX stocks were trading at lower valuations than U.S. peers, making them a relatively cheap buy based on their earnings.
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Gold rush: Gold has been a hot commodity as investors hedge against uncertainty, and Canadian-listed gold producers like Barrick and Agnico Eagle have reaped the rewards.
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A surprisingly strong earnings season. Earnings from TSX firms have beaten expectations by 7.5% on average this year. Shopify, which has rallied 42% this year, beat its Q2 earnings expectations by 25% last month.
Why it matters: The market rally underscores just how well Canadian companies have fared in the face of U.S. tariffs, largely thanks to the CUSMA free trade deal that has kept ~85% of Canadian exports flowing into the U.S. tariff-free.
Yes, but: With renegotiation of that agreement beginning imminently, the good times for Canadian stocks could soon come to an abrupt end. —LA