Why Canada’s Stock Market Outperformed US Counterparts in 2025: Will This Continue in 2026?

As implausible as it may seem, the Toronto stock market left its American counterparts in the dust last year, despite Canada’s economy being burdened by U.S. tariffs and grappling with its own productivity issues.

The S&P/TSX Composite Index, which serves as the benchmark for the Toronto Stock Exchange (TSX), has grown twice as much as U.S. equivalents in certain instances, with a notable increase of 27 percent.

Economists attributed this to an outperformance of natural resource stocks due to surging prices of precious metals like gold and silver, which hold a greater weight in the S&P/TSX Composite Index compared to its American counterparts. A lower Canadian dollar and several Bank of Canada interest rate cuts also helped to boost investment.

The benchmark S&P 500, which tracks the stock performance of 500 leading U.S. companies, grew by 16 percent in 2025. The U.S. Dow Jones, which tracks 30 prominent U.S. companies, grew by 13 percent, while the tech-heavy Nasdaq Composite grew more robustly with a 20 percent increase.

The S&P 500 and the Nasdaq Composite had outperformed the S&P/TSX Composite Index in both 2023 and 2024, in almost all cases by a significant margin.

The stellar performance of the TSX could be seen as surprising, considering that the administration of U.S. President Donald Trump imposed tariffs on Canadian exports while also enacting business-friendly policies domestically.

Meanwhile, the Canadian economy has grown more slowly than its southern neighbour. According to latest figures, Canada’s real GDP grew by an annual rate of 2.6 percent in the third quarter of 2025, compared to 4.3 percent in the United States.

While the TSX could continue outperforming in 2026 if commodity prices keep rising and foreign capital continues chasing Canada’s resource sector, analysts expect Canada’s stock market growth to be milder this year than it was in 2025.

Much of the TSX’s strong performance in 2025 had to do with it being more heavily weighted in commodities and materials like precious metals and fertilizer—which performed well in 2025—compared to the Dow Jones and S&P 500, according to BMO Financial Group chief economist Doug Porter.

In addition, the Bank of Canada cut interest rates more than the U.S. Federal Reserve did in 2025 as well as in 2024, and rates in Canada are quite a bit lower than in the United States, Porter told The Epoch Times in an interview. The Canadian policy rate is currently 2.25 percent compared to the U.S. target range of 3.5 percent to 3.75 percent.

Porter said the rate cuts in Canada have “definitely helped support the market indirectly.” The TSX could continue outperforming U.S. indexes in 2026 if commodity prices continue to grow, he added.

“I suspect it’ll be a close call between [the indexes as to] who performs in the year ahead,” Porter said. “The valuation gap is not as clear-cut a positive for Toronto as it was last year, and so ultimately, it may come down to just how commodity prices fare in the year ahead.”

Kevin Headland, co-chief investment strategist with Manulife Investments, said gold financials and Shopify were responsible for roughly 65 percent of the TSX’s outsized performance in 2025. He also said the S&P 500 saw a larger sell-off following Trump’s “Liberation Day” tariff announcements in April 2025.

“When you start the year, or the first quarter, off a big decline, it’s hard to climb out of that hole,” he said of the S&P 500.

Headland projected that the TSX could see its “momentum” continue if more foreign investment comes into the country for gold, similar to what took place in 2025, but he said he “would be hard pressed to see a similar type of performance for TSX this year as it was last year.”

Headland said that Canada’s stock index is not seen as undervalued as it was before and that earnings growth is not likely to be as high this year. He said he expects that the TSX and S&P 500 could be “perhaps more in line with each other in 2026 than we saw in 2025.”

Carleton University professor of business Ian Lee said a weaker Canadian dollar relative to the U.S. dollar—which “creates perceived values, because you can buy cheap [in the TSX] by converting into the Canadian dollar”—also boosted stock values in 2025.

In addition, Lee said the increasingly global need for natural resources could act as a “magnet for foreign investment to come into the TSX” but this is dependent on the Canadian government putting policies in place to allow for the development and export of those materials.

Outperformance in 2025

The S&P/TSX Composite Index, compared to the Dow Jones and the S&P 500, more heavily weighs for materials and energy stocks, both of which performed well in 2025 in relation to other sectors like information technology and communication services. The vast majority of the “weight” in the S&P/TSX Composite Index is made up of Canadian stocks, but it also has the S&P 500 weighted at 0.6 percent.

When broken down by sector, 18.1 percent of the weight of the TSX’s approximately 230 to 250 stocks are in the materials sector and 14.8 percent are in the energy sector. By contrast, the S&P 500 has 2.8 percent of its market capitalization weight in energy and 1.8 percent in materials, and the Dow Jones has just one energy company, Chevron Corp., and one materials company, Dow Inc.

The two materials stocks performed the best among the 10 most heavily weighted stocks in the TSX in 2025. Canadian-based gold producer Agnico Eagle Mines Limited, the eighth-largest weighted stock in the TSX, rose by 106.8 percent in 2025. The tenth-largest weighted stock in the TSX, Barrick Mining Corporation, rose by a whopping 172.7 percent in 2025.

Lee said that silver and gold going “through the roof” helped the TSX’s performance because it is more heavily weighted in commodities than its American indexes.

“I don’t think it’s because the Canadian economy is a better investment overall than the U.S. If you look at any of the metrics, whether it’s productivity or whether it’s the GDP growth rate, the U.S. economy is stronger and doing better,” he added.

BMO’s Porter said the TSX tends to outperform the S&P 500 when commodity prices are rising, but 2025 had “nuance” because some commodities did not perform well, while others like gold miners and fertilizer companies “almost doubled.”

Precious and industrial metals performed well in 2025, with gold rising by 62.5 percent, silver rising by 142.6 percent, and copper rising by over 42 percent, but other commodities underperformed. The stock of the largest fertilizer company in Canada, Nutrien, also rose significantly in 2025, by 36 percent.

Porter said that even if gold is taken out of the commodities picture, the TSX would have still outperformed the S&P 500 in 2025, which he said is “very impressive” given the headwinds facing the Canadian economy due to U.S. tariffs.

By contrast, Porter said financials and consumer discretionary stocks did not do as well as commodities. Financials include banks, insurance companies, asset managers, and wealth managers, while discretionary stocks include retail, travel and leisure, restaurants, and entertainment.

Financials constitute 33.1 percent of the S&P/TSX Composite Index, whereas consumer discretionary stocks account for 3.3 percent. In contrast, for the S&P 500, financials represent 13.4 percent, while consumer discretionary comprises 10.4 percent.

However, with Canadian banks performing well in 2025, their higher weight in the TSX versus the S&P 500 helped raise the TSX’s performance. The TD Bank stock rose by 78.2 percent, while CIBC’s went up by 37.6 percent, and BMO by 27.5 percent.

Energy commodities did not perform as well. The largest commodity benchmark of Brent Crude oil fell by 19.7 percent in 2025, while natural gas rose by just 7 percent.

Manulife’s Headland said the TSX’s performance was also helped by Shopify, the second-largest company in Canada by market cap, seeing its stock rise by 52 percent in 2025. Headland said the stock is correlated to the U.S. technology market, which allowed it to perform well in 2025.

Other factors having an impact on boosting the Canadian stock market include the Bank of Canada cutting interest rates faster than the U.S. Federal Reserve, said Porter. The Bank of Canada cut interest rates four times in 2025, to the current 2.25 percent, while the Federal Reserve cut rates just three times, to 3.75 percent.

A depreciated Canadian dollar—which decreased in value from 74 cents to 68 cents against the U.S. dollar by the end of 2024 and stayed low for a significant portion of 2025—also rendered Canadian stocks more attractive to foreign investors, Lee said.

Trend Continues in 2026?

Porter said that the TSX could continue outperforming U.S. indexes in 2026 but that this would likely depend on whether commodities continue to perform well.

BMO said in its Dec. 12, 2025, commodities outlook for 2026 that it expects gold to maintain a range of approximately US$4,200 per ounce in 2026, and silver would average around US$50 an ounce, up from under US$40 an ounce in 2025, due to “years of production deficits” and increasing industrial demand from solar panels, electric vehicles, and AI infrastructure.

That report was released on Dec. 12, 2025, before gold rose to its all-time high of US$$4,549.74 on Dec. 26 and silver surged to its all-time high of US$83.90 on Dec. 28. Experts say higher prices for precious and industrial metals would likely lead to higher profits for miners that have fixed operating costs, and potentially higher stock prices.

Headland said that with investors coming to Canada to “chase” the gold market in 2025, that trend could continue with investors searching for undervalued mining and energy stocks.

The BMO report said West Texas Intermediate (WTI) crude oil prices are likely to remain at an average of US$62 a barrel in 2026, down from US$65 a barrel in 2025, as “fears of a growing oil market glut remain the dominant concern and are likely to continue to weigh on prices in the near term.”

Headland said oil will likely be in a “tight trading range” in 2026 due to lower demand and to supply being maintained at the same level. “Therefore we don’t see much of a tailwind in energy companies as a result of just the commodity price increase, or lack thereof,” he said.

If the Canadian dollar were to rise in value after the U.S. Federal Reserve decreases interest rates, that could also increase profits for foreign investors and drive Canadian stock prices higher, Headland said.

He said action by the Canadian government could improve the “perception” of the value of energy and resource stocks for investors. “If the Canadian government remains committed, and we start getting closer to shovels in the ground, I think investors could be interested in certain areas of our material sector, which would ultimately be positive for the TSX,” he said.

The Liberal government created the Major Projects Office (MPO) in 2025, which aims to reduce the approval time for railways, pipelines, wind farms, and mines. Some of the projects recommended for approval in 2025 included the Red Chris Mine in northwestern B.C. to mine copper and gold, expansion of the McIlvenna Bay Foran Copper Mine Project in Saskatchewan to mine copper and zinc, and the second phase of the LNG Canada facility in Kitimat, B.C., to double its production of liquified natural gas.

The Conservative Party has criticized the MPO, saying the federal government should instead remove measures like the Impact Assessment Act that make it more difficult to build projects. The party said Ottawa should simply “get out of the way” and encourage development by cutting taxes and red tape.