Canada's TSX stock index predicted to rise 2.3% by year-end on trade certainty hopes: Reuters poll

A recent Reuters poll forecasts Canada's S&P/TSX Composite Index to extend its record run, rising 2.3% to 28,553 by year-end and reaching 30,000 by the end of 2026, an over 7% gain. This bullish outlook, which follows a more than 25% rally from April lows, is primarily attributed to anticipated lower borrowing costs from the Bank of Canada and greater clarity on U.S. tariffs, despite increased duties on some goods. While some strategists expect corporate earnings to face pressure in the second half of 2025, particularly in consumer-facing sectors, the strength of resource and export-oriented companies is expected to provide a significant offset.

Analysis

A recent Reuters poll indicates a sustained bullish outlook for Canada's S&P/TSX Composite Index, with strategists forecasting a 2.3% rise to 28,553 by year-end and a further advance to 30,000 by the end of 2026. This optimism, which follows a more than 25% rally from an April low, is primarily driven by two factors: greater clarity on U.S. trade policy, where the U.S.-Mexico-Canada Agreement exempts approximately 92% of Canadian exports from tariffs, and an accommodative monetary stance from the Bank of Canada, which has already lowered its benchmark rate by 225 basis points to 2.75% with potential for further cuts. However, this positive sentiment is tempered by concerns over corporate profitability, as a majority of surveyed analysts expect marginally lower earnings in the second half of 2025 due to pressure on consumer-facing sectors and rising costs from AI investments. The index's significant 30% weighting in the energy and materials sectors is viewed as a critical buffer, with a 27% surge in gold prices expected to support materials companies and help offset weakness elsewhere.

Key Decisions for Investors

• Given the strong bullish consensus and upwardly revised forecasts, investors could consider tactical pullbacks as opportunities to add exposure to the Canadian market, in line with strategist recommendations.
• Portfolio allocation may benefit from an overweight position in resource and export-oriented companies, as the materials sector is buoyed by surging gold prices and is expected to cushion the index against weakness in consumer-facing segments.
• Monitor corporate earnings reports for the second half of 2025 closely, as consensus points to a marginal decline which could introduce market volatility if results underperform muted expectations.
• Future guidance from the Bank of Canada is a key catalyst to watch, as the prospect of additional interest rate cuts is a primary driver supporting the forecast for the index.