TSX Hits Record High – Outlook Remains Bullish Throughout 2025

For much of 2023, the TSX traded in a tight range, but the U.S. Federal Reserve announced in early November that it was done raising interest rates and would pivot to cutting rates. While the Fed hasn’t announced any rate cuts just yet, investor optimism has sent the TSX steadily higher since then.

How Are Canadian Stocks Doing?

From the start of 2023 through the end of October, the TSX was actually down 2.65% year-to-date. Since the start of November 2023, the TSX has rallied an impressive 23.3% and is, as of this writing, up 11% year-to-date.

On Monday, August 26, the TSX hit a new all-time record intra-day high of 23,413.95 and closed out the day at a record 23,348.97. This surpassed the previous record closings set on Friday, August 23 and Wednesday, August 21.

Much of those gains are being attributed to the energy, financial, and materials sectors, which account for a combined 61% of the index. The recent gains come on the heels of Federal Reserve Chair Jerome Powell suggesting the first interest rate cuts of this cycle will come in September. This also raised hopes that the U.S. will avoid a recession.

The Bank of Canada has already reduced interest rates twice since June and is expected to do so again in September and numerous times over the coming year. Financial stocks do well from lower interest rates and increased demand for loans.

Energy stocks, like oil and gas, are benefiting from a positive outlook for the U.S. economy and production cuts in places like Libya. Commodities like gold are at record levels too. The outlook for the U.S. economy remains solid but there is still some uncertainty. And that is sending investors into safe-haven investments like gold and silver, which in turn is sending precious metal stocks higher too. All of which benefits the TSX.

Can the TSX Climb Higher?

Thanks to the strength of financial stocks, commodity stocks, and energy stocks, the TSX is in record territory. Despite the big bullish moves in 2024, the TSX still has room to run. In fact, Canada’s main stock market index is expected to extend its record-setting ways over the coming months and through 2025.

The median prediction of 20 economists and strategists from early August showed the TSX rallying to 23,750 by the end of 2024. That points to a potential upside of 2%. That number also tops the 22,500 projected in the May poll.

For 2025, the TSX is expected to climb to 24,350 by the end of 2025. That points to an additional upside of 4.7% from current levels. As we have seen though, market sentiment can change quickly.

There’s every reason to believe portfolio managers could raise their bullish sentiment on the TSX over the coming months. Bank of America Corp’s Canada cycle indicator, which predicts Canadian stock outperformance against the S&P 500, turned positive for the first time since March 2023.

What does that mean? When the Canada cycle indicator turns positive, the TSX has outperformed the S&P 500 60% of the time.

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