Donald Trump had just unleashed the harshest tariffs since the Great Depression, effectively choking off trade and tearing up a trade agreement he had negotiated. The US president was also openly musing about annexing Canada, stoking unfathomable tensions between the two longtime allies. Political turmoil in Canada added to the unease.

Then Trump backed down from his most punishing tariffs. Technocrat Mark Carney took over as prime minister, easing financial market jitters and cooling tensions with Trump. And, it turned out, Canada’s equity market — driven by miners and internationally renowned financial firms — was perfectly situated for the chaos of Trump’s new world order.

The S&P/TSX Composite Index soared more than 40% from an April 8 low, ending the year with a 28% advance. It was the biggest year since 2009, when the rebound from the financial crisis led to a 31% gain. The index notched a record 63 new closing highs along the way, owing to a steady march higher over the year’s final seven months.

Mining and bank stocks have been central to the rally, with the materials subindex nearly doubling on the back of rallies in gold, silver, copper and palladium. The financials group jumped more than 30%. Tech darlings like Shopify Inc. and Celestica Inc. also contributed.

“The numbers themselves are somewhat jaw-dropping,” said Philip Petursson, IG Wealth Management’s chief investment strategist. “But, I mean, you could sit there and say this is still a well-balanced market that has further upside in 2026.”

The fuel for the rally that powered precious metals to records may not be spent. Three Federal Reserve rate cuts were a boon to an asset class that doesn’t pay interest. 

Gold and silver also served as a safe haven for traders worried about uncertainty around US trade policies and geopolitical tensions and conflict in Europe and the Middle East. Neither of those concerns has been laid fully to rest.

Petursson said he sees further runway for gold prices to continue supporting the S&P/TSX Composite, but not to the same degree the markets have seen in the past year. 

“It would be foolish to just extrapolate this year’s gains into 2026,” he said — noting, however, that “the fundamentals are still there” as central banks are expected to continue cutting rates. The Fed is expected to cut twice in 2026. 

Canada’s Big Six banks, including Toronto-Dominion Bank and Bank of Montreal, posted stronger profits than expected over the year, with the adjusted earnings per share rising about 15%, on average.

The financials group, including insurers, asset managers and banks, accounts for 33% of the Canadian index. The whole sector has enjoyed the benefit of lower rates in both the US and Canada, along with profits from dealmaking and solid lending performance that required lower provisions for credit losses than the pessimists had forecast. 

Canadian banks’ 40% gain far outpaced US counterparts in 2025.

There is some concern over the group’s performance heading into 2026. Bank valuations have been elevated at the same time that the Canadian economy may be starting to feel the strain of higher tariffs, said Craig Basinger, Purpose Investments’ chief market strategist. 

“Gold, energy — those sectors really don’t care about the Canadian economy, but the banks probably should,” Basinger said. “And this just doesn’t feel like the time to be paying a premium valuation for Canadian banks.”

The S&P/TSX Composite banking subindex’s price to earnings ratio is more than 14, compared with below 10 in 2022. Canadian bank stocks are now trading at twice book value, according to data compiled by Bloomberg — they had fallen below 1.4 times book during the market’s April tariff tantrum. 

The Canadian index’s record came despite a poor year for crude oil prices. The problem, though, is the outlook for oil remains muted at best. Basinger said jumping into oil and gas stocks would be a very contrarian move, given how demand is struggling to keep up with supply. 

The market would also be vulnerable to any troubles in precious metals. Already, silver is sliding into the end of the year, though still on track for a record gain.

Basinger’s firm took a partial underweight position in S&P/TSX Composite in the fourth quarter, which he said was more about profit-taking after “three consecutive years of oversized gains” rather than any negative view of the index.   

If the new year brings upside surprises to oil, then strategists like Petursson say Toronto-listed stocks are a great way for foreign investors to leverage the energy play. For Petursson, the answer to the question of whether investors can be successful putting their money outside of the US is “yes” and there are great options in Canada, Asia and Europe.

“When foreign investors are looking for pockets of opportunity, if the TSX was not on their radar, I think it is now,” Petursson said.