Introduction:
Canadian investment strategists are feeling optimistic about the future of the country’s stock market. Despite concerns about tariffs under Donald Trump’s potential administration and fears of a recession, many experts are betting that the S&P/TSX Composite Index will reach 28,000 points in 2025, a new all-time high. Let’s break down why strategists are confident in Canada’s market and what’s driving this positive outlook.
Canada’s Stock Market in 2024: A Strong Start, Even Amid Uncertainty
The S&P/TSX Composite Index has already had a strong year, up about 18% in 2024, marking its best performance since 2021. Despite uncertainty caused by threats of tariffs from Donald Trump’s incoming administration and concerns over a potential recession, the Canadian stock market has remained resilient. In fact, it’s currently higher than it was on the day of the 2024 US election.
Why the Optimism? Rising Earnings and Falling Interest Rates
Several factors are fueling optimism for Canada’s stock market in 2025:
- Rising Corporate Earnings: Many Canadian companies have been posting strong earnings, boosting investor confidence in the market’s future growth.
- Lower Interest Rates: The Bank of Canada began cutting interest rates in June 2024, lowering the overnight rate to 3.25%, a full 125 basis points below the US Federal Reserve’s rate. Lower interest rates are usually positive for stocks as they make borrowing cheaper and encourage investment.
Philip Petursson’s Bold Prediction: TSX Could Reach 28,000 Points
One of the market experts making a bullish prediction is Philip Petursson, Chief Investment Strategist at IG Wealth Management. Petursson believes that Canadian stocks are more attractively priced compared to US stocks. He has set his target for the TSX Composite Index at 28,000 points for 2025, predicting that Canada’s market will see another year of double-digit returns.
Petursson explains, “Canada has quite the edge over the S&P 500. If US inflation and interest rates stay higher, Canada looks much more attractive to investors.”
Why Does Canada Have an Edge Over the US?
While the US stock market (S&P 500) has been performing well, Petursson points out that Canadian stocks are more reasonably valued. This means there’s more room for growth in Canada, especially as interest rates fall and inflation pressures ease. As the US faces challenges with higher inflation and rates, Canada’s market may be better positioned for sustained growth.
The Road Ahead: What’s Next for Canada’s Stock Market?
Looking ahead, Canadian strategists are keeping an eye on several key factors that could influence the market in 2025:
- Ongoing Rate Cuts: If the Bank of Canada continues to cut rates, it could provide even more support for stock prices.
- Corporate Earnings: Continued growth in corporate profits will be critical to pushing the TSX Composite Index higher.
- Global Factors: Geopolitical tensions, US economic policies, and global trade dynamics, including any potential tariffs, will also play a role.
Conclusion: Why Investors Should Watch Canada in 2025
With rising corporate earnings and lower interest rates, Canada’s stock market is poised for strong growth. If strategists like Philip Petursson are right, the S&P/TSX Composite Index could hit a record 28,000 points by 2025, marking another year of solid returns. While there are always risks, Canada’s market is looking increasingly attractive compared to the US, especially in a high-inflation, high-interest-rate environment.
I am Aparna Sahu
Investment Specialist and Financial Writer
With 2 years of experience in the financial sector, Aparna brings a wealth of knowledge and insight to Investor Welcome. As an accomplished author and investment specialist, Aparna has a passion for demystifying complex financial concepts and empowering investors with actionable strategies. She has been featured in relevant publications, if any, and is dedicated to providing clear, evidence-based analysis that helps clients make informed investment decisions. Aparna holds a relevant degree or certification and is committed to staying ahead of market trends to deliver the most up-to-date advice.