How Canada is quietly beating Wall Street

Canada’s stock market is quietly beating Wall Street this year – and the drivers are the same sectors many Canadian advisors already know best: banks, materials and defensives. 

According to Bloomberg, the S&P/TSX Composite Index is up 26 percent so far this year and on pace for its strongest gain since 2009, outperforming the S&P 500 by about 10 percentage points in a rising market.  

Bloomberg also noted that, on a currency-adjusted basis, the TSX is up 29 percent versus 16 percent for the S&P 500. 

The TSX’s sector mix sits at the core of that outperformance.  

Banks make up about one-third of the index and miners and energy producers account for another third, allowing Canadian equities to benefit from rate cuts and historic rallies in gold and silver, while also offering global investors an alternative to US tech concentration. 

On financials, Bloomberg said TSX-listed banks and other financial firms have gained about 25 percent this year, with just four of 23 names in the red.  

Sprott Inc. has doubled, Toronto-Dominion Bank has climbed 54 percent, and Bank of Montreal and Bank of Nova Scotia have risen 27 percent, aided by central bank rate cuts that boosted interest income. 

The Canadian Press reported that the Big Six banks wrapped up their fourth-quarter earnings season with profits that beat analyst expectations.  

TD, BMO, CIBC, Scotiabank, RBC and National Bank generated a combined $16.45bn in profit for the period, up from $14.73bn a year earlier. 

CIBC shares jumped more than 4 percent on the day, TD gained about 2 percent, while BMO dipped slightly after its results. 

“It’s earnings-driven for the most part,” said Brent Joyce, chief investment strategist at BMO Private Wealth, in comments reported by The Canadian Press.  

He added that bank stocks globally “really do need the earnings to justify and then also over-deliver,” and said he expects that positive earnings dynamic to continue into 2026.

On the resource side, Bloomberg reported that historic rallies in metals, especially gold and silver, have helped drive TSX materials stocks to a roughly 90 percent gain this year.  

According to Bloomberg, Discovery Silver Corp. has risen eleven-fold, while Aris Mining Corp., Lundin Gold Inc. and New Gold Inc. have at least tripled. 

Positioning versus US tech is another theme.  

Bloomberg noted that technology accounts for about one-third of the S&P 500 and that a handful of megacap names such as Nvidia Corp. and Alphabet Inc. have generated virtually all of that index’s advance this year.  

In contrast, Bloomberg said tech is only the fifth-largest sector in Canada at 9.9 percent of the TSX, even though Shopify Inc. has gained 46 percent this year. 

“One of the reasons you’re going to be bullish about Canada is that you’re worried about whether there is, as some people call it, an AI bubble,” said Sadiq Adatia, chief investment officer at BMO Global Asset Management, in comments reported by Bloomberg.  

Adatia does not personally believe AI stocks are in a bubble, but argued that any renewed valuation concerns in the US tech sector could support further Canadian outperformance in 2026. 

On the macro side, Bloomberg said recent data showed two straight months of positive labour-market surprises and a sharp rebound in third-quarter GDP, helped by rising military spending and a stronger housing sector.  

Philip Petursson, chief investment strategist at IG Wealth Management, which manages $158bn, expects Canada to outperform over the longer term and forecasts a nearly 13 percent return for the S&P/TSX next year.  

Bloomberg reported that he sees Canadian firms matching US earnings growth while trading at lower price-to-earnings ratios. 

Policy and project spending also feed into what some call a “Build Canada” theme.  

Prime Minister Mark Carney’s push to build major projects to shield the economy from US President Donald Trump’s tariffs is viewed as a tailwind for Canadian equities.  

“The theme we’ve talked about all year is this ‘Build Canada’ theme,” said Mark Rutherford, co‑manager of Canadian equity strategy at Mawer Investment Management Ltd., in comments reported by Bloomberg.  

He said there is “a lot more optimism” toward Canadian businesses and stocks and called it “a huge signal to the world that Canada is a welcome place where you can deploy capital.” 

For risk management, advisors may want to note how fragile back‑to‑back outperformance has been historically.  

Bloomberg pointed out that the TSX has beaten US stocks in consecutive years only once this century. 

“It is pretty rare to see back-to-back years of TSX outperformance,” said Geoff Phipps, trading strategist and portfolio manager at Picton Investments, which manages $16.1bn. 

Craig Basinger, chief market strategist at Purpose Investments Inc., said the Canadian market “needs its laggards to step up” if the rally is to continue into 2026. 

Bloomberg reported that a persistent decline in oil prices has weighed on energy producers, and Basinger argued that “if the TSX is going to keep pushing higher, it would likely need a lift from Industirals and Energy.”  

He also said he is more cautious on Canada now than at the beginning of 2025, prior to the sharp Toronto rally. 

Looking ahead, Joyce expects central banks to remain the main focus.  

He told The Canadian Press he does not anticipate much change in Canadian rates in the near term but sees a likely quarter‑point cut in the US next week, with room for the Federal Reserve to cut “upwards of maybe three times over the next several quarters.”