According to a recent Reuters poll, Canada's main stock index is poised to achieve a new record high by the end of 2025, supported by lower borrowing costs. However, an uncertain global trade outlook may curb gains and potentially trigger a correction.
A survey of 19 portfolio managers and strategists conducted from February 13 to 25 forecasts the S&P/TSX Composite index to climb by 5.4% to 26,500 by year-end, surpassing the previous record set in January and nearing the 26,550 projection indicated in a previous November poll.
Expectations suggest the index could reach 26,710 by mid-2026, a 6.2% increase compared to the earlier estimate of 27,500.
As for the United States-Canada trade relations, President Donald Trump assured that efforts to enhance border security and curb fentanyl trafficking are progressing as planned, despite uncertainties. Canada, heavily reliant on U.S. markets with about 75% of its exports directed there, may face challenges due to trade policy ambiguities impacting global growth.
"Companies and sectors with greater exposure to the U.S. will likely underperform if tariffs are imposed," noted Tiago Figueiredo, a macro strategist at Desjardins.
Many analysts express concerns about the trade uncertainties affecting Canadian markets. Michael Sprung, president of Sprung Investment Management, anticipates a cautious investment environment with a potential slowdown in earnings growth compared to 2024 and a probable correction in the market.
Philip Petursson, chief investment strategist at IG Wealth Management, highlighted that market resilience is being tested by ongoing trade tensions, with several analysts foreseeing increased market volatility in the near term.
While sectors like financial, telecom, real estate, energy, and materials are anticipated to navigate tariff impacts well or even benefit from exemptions, a lower Canadian dollar and reduced interest rates could provide some market support.
With the Bank of Canada having lowered its benchmark rate to 3% due to uncertainties, Angelo Kourkafas, a senior investment strategist at Edward Jones, expects elevated volatility in the coming months. Despite challenges, he believes the equity bull market will persist, potentially with a less severe effect on the TSX compared to the broader economy.