Canadian stocks set record for records in ‘jaw-dropping’ year

Market Performance - Canadian equities are closing out their second-best year this century, with the S&P/TSX index on track for a 29% advance, trailing only 2009's 31% gain [1][3] - The index has achieved a record 63 new all-time highs over the year, driven by a steady increase in the final seven months [3] Sector Contributions - The rally has been significantly supported by the materials sector, which doubled due to increases in gold, silver, copper, and palladium prices, while the financials group jumped 40% [4] - Tech companies like Shopify Inc. and Celestica Inc. contributed a combined 11% increase to the index during the year [4] Economic Factors - The Canadian economy has benefited from lower interest rates, with three Federal Reserve rate cuts positively impacting precious metals, which do not pay interest [5] - Canada's Big Six banks reported stronger-than-expected profits, with annual adjusted earnings exceeding Bloomberg consensus expectations by an average of 2 percentage points [7] Valuation Concerns - There are concerns regarding elevated bank valuations as the Canadian economy may face strains from higher tariffs, with the banking subindex's price-to-earnings ratio reaching nearly 15, up from a low of 9.7 in 2022 [9] - The performance of the banking sector may be more sensitive to economic conditions compared to sectors like gold and energy, which are less affected by the Canadian economy [9] Oil Market Outlook - Despite the Canadian index's record performance, the outlook for crude oil prices remains muted, with demand struggling to keep up with supply [10] - The market could be vulnerable to fluctuations in precious metals, as evidenced by silver's recent decline, although it is still on track for a record gain [11] Investment Opportunities - Strategists suggest that if oil prices improve, the S&P/TSX Composite could be an attractive option for foreign investors looking to leverage energy plays [12] - There is a growing recognition of the TSX as a viable investment opportunity for foreign investors seeking alternatives outside the US market [12]