Toronto’s main stock exchange has delivered its strongest performance in over 15 years, catching most market watchers off guard and leaving its American counterpart in the dust.
The S&P/TSX Composite Index has jumped 26% so far in 2025, with just four weeks remaining in the year. This marks the biggest yearly climb since 2009. For the first time since 2016, Canadian stocks are beating American ones during a market upswing, ahead by a massive 10 percentage points.
When accounting for currency differences, the gap grows even wider. Canadian stocks have risen 29% compared to 16% for the S&P 500.
The strong showing came as a shock to many. Earlier this year, worries about a possible recession spread across the country after US President Donald Trump tore up existing trade agreements and slapped harsh tariffs on Canadian goods while questioning the nation’s independence.
However, these threats ended up triggering a wave of spending at home that boosted the economy.
What’s driving Toronto’s market surge?
The makeup of the Toronto exchange also played a key role in the success. Banks represent roughly one-third of the index’s total value, while mining and energy companies make up another third. This mix lets Canadian firms take advantage of climbing metal prices and dropping interest rates. The exchange also drew investors looking to spread their money beyond technology stocks.
Sadiq Adatia, who oversees investments at BMO Global Asset Management, pointed to concerns about overvalued tech stocks as a reason for optimism about Canada.
“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,” Adatia said to Bloomberg. He noted that renewed worries about American tech valuations could help Canada stay ahead in 2026.
Safe haven status attracts global investors
During the past month, when the S&P 500 dropped as much as 5% from its October high, Canadian stocks did much better. Throughout the year, money has flowed into Canada as investors sought safer options and worried about sky-high prices for artificial intelligence companies.
Technology companies make up one-third of the S&P 500, with a small group of giants like Nvidia and Alphabet responsible for nearly all of the index’s gains this year. In Canada, tech ranks fifth among 11 sectors at just 9.9% of the index. Still, online seller Shopify has jumped 46% and stands as one of 2025’s top performers.
Canadian banks have climbed 25% this year, with only four of the 23 members posting losses. Sprott has doubled in value, Toronto-Dominion Bank has risen 54%, and both Bank of Montreal and Bank of Nova Scotia have surged 27%. The sector benefited from several interest rate cuts by the central bank that helped boost earnings.
Major gains in precious metals noted by Cryptopolitan, especially gold and silver, pushed materials companies up 90% this year. Discovery Silver has multiplied 11 times, while Aris Mining, Lundin Gold and New Gold have all at least tripled.
The Canadian economy has also shown signs of getting stronger, including two months of better-than-expected job numbers. Data released Friday showed the economy bounced back strongly in the third quarter thanks to increased military spending and recovery in housing.
Prime Minister Mark Carney’s efforts to launch major infrastructure projects aimed at protecting the country from Trump’s tariffs are seen as positive forces for stocks next year.
The economy still faces real hurdles in 2026, including potential changes to the free-trade deal between Canada and the US. Canadian stocks have only beaten American ones in back-to-back years once this century.
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