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How Did Stocks on the TSX Do in 2021?

In 2020, Canada’s benchmark stock index, the S&P/TSX composite, eked out a 2.17% gain during the worst economic and health crisis in 100 years. Vaccines rolled out in 2021 but the pandemic raged on with the highly contagious delta and omicron variants sweeping the planet.

This makes the TSX composites’ 2021 gain of 21.7% all that much more remarkable.

During 2021, the TSX posted 62 new highs and breached the 20,000 point milestone for the first time back in June. In October, it surpassed the 21,000 level. To put that number in perspective, the TSX came second only to the S&P 500 in 2021 with the U.S. benchmark advancing nearly 27% and posting 68 record highs.

For the record, the S&P/TSX Composite Index is a capitalization-weighted index that follows the performance of Canada’s largest TSX listed companies. It’s the equivalent of the S&P 500 index in the U.S.

The tech heavy NASDAQ advanced 21.4% in 2021 and the Dow Jones Industrial Average gained 18.7%.

Much of the rally in Canadian stocks can be attributed to the 50% increase in the price of crude-oil. This explains why energy stocks were the biggest winners of 2021. In fact, the top four performing stocks on the TSX and eight of the top 10 stock were from the energy sector in 2021.

At the other end of the spectrum were Canada’s cannabis stocks. Canadian and U.S. cannabis stocks took a big hit in 2021 on the heels of political apathy in Washington, D.C. On the 2020 campaign trail, the Democrats told voters if they wanted to see cannabis become legal on the federal level, you need to vote for them!

The Democrats may have won the White House, and taken the House of Representatives, and Senate, but their promises of legalizing adult-use cannabis have gone cold, putting downward pressure on marijuana stocks.

That could change though in 2022 with rival Republican and Democrat bills being debated in the Senate. On top of that, Mexico legalized adult use cannabis use, which leaves it sandwiched between the two largest pot-selling nations. Recreational cannabis reforms are also expected to sweep Europe in 2022.

Which Sectors Are Expected to Do Well in 2022?

More broadly, there are numerous reasons why investors should remain bullish on the TSX in 2022. First, thanks to strong earnings, sales, and high margins, Bay Street companies are sitting on a pile of cash, and they plan to reward patient investors with even more share buybacks and dividends in 2022.

Analysts expect TSX-listed companies to return $120 billion to investors in 2022, with $30 billion going to buyback and $90 billion to dividends. The biggest winners are expected to be energy and financial stocks.

Second, Canadian stocks are trading at a steep discount when compared to U.S. stocks. The energy and materials sectors look like they have the biggest upside potential relative to their global peers. Canadian financials and consumer discretionary stocks also look attractive when compared to their U.S. counter parts.

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The TSX and the benchmark composite index had a great 2021 and economists think we are in for more of the same in 2022. That said, some sectors and individual stocks will do better than others. Time will tell of course. There remains a lot of ongoing uncertainty with COVID-19 variants, inflation on the rise, interest rates running in step, and geopolitical tensions with Russia and China. Instead of waiting until December to find out, the trading professionals at Learn-To-Trade.com can teach you how to make money no matter what the markets are doing.

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