TSX Set to Keep Climbing as Lower Interest Rates and Trade Clarity Boost Market Confidence
Canada’s main stock index, the S&P/TSX Composite, is expected to continue its strong performance through the rest of 2025 and into 2026, according to a recent Reuters poll of market experts. Lower borrowing costs and greater clarity around U.S. tariffs are helping to offset concerns about slowing corporate profits.
A survey of 20 equity strategists and portfolio managers, conducted from August 7 to 18, projects the TSX will rise 2.3% to 28,553 by the end of 2025 — surpassing its recent record high. Looking further ahead, the index is forecast to hit 30,000 by the end of 2026, a gain of more than 7% from current levels.
“We’re seeing signs of a renewed bull market for Canadian equities,” said Philip Petursson, Chief Investment Strategist at IG Wealth Management. “With U.S. trade policy becoming more predictable, investors have a clearer path forward.”
Why the TSX Is Climbing
The TSX has rallied over 25% since April, thanks to easing fears around U.S. trade tariffs and the Bank of Canada’s aggressive rate cuts. While the U.S. has raised tariffs on Canadian goods from 25% to 35%, most Canadian exports (about 92% in June) remain exempt under the U.S.-Mexico-Canada Agreement (USMCA).
Meanwhile, the Bank of Canada has cut its benchmark rate by 225 basis points since June 2024, now sitting at 2.75%. The central bank has also indicated it's open to further cuts if inflation risks from trade disruptions remain under control.
“Despite short-term weakness in the job market, we expect rate cuts and trade clarity to support economic growth in 2026,” said Michael Dehal, Senior Portfolio Manager at Raymond James.
Profit Pressures Still Linger
Not everything is rosy. Six out of 11 analysts in the poll said they expect slightly weaker corporate earnings in the second half of 2025 compared to the first half.
“Consumer-facing sectors are still under pressure,” noted Victor Kuntzevitsky of Stonehaven at Wellington-Altus Private Counsel. “And while AI investments are rising, the payoff in terms of revenue hasn’t arrived yet.”
However, resource and export-driven companies may help cushion the broader market. Canada’s energy and materials sectors — including oil, gas, and mining — make up about 30% of the TSX. Despite falling oil prices, gold has surged by 27% this year, supporting the materials sector.
“Short-term pullbacks should be seen as buying opportunities,” said Angelo Kourkafas, Senior Global Investment Strategist at Edward Jones. “This bull market has strong fundamentals behind it.”