When the economy is booming, it’s not uncommon, or always newsworthy, if the stock market hits a new record high. In fact, there are times when the S&P 500 seems to hit a new record high every few weeks.
But in this economic climate, one plagued by stubbornly high inflation, interest rates at decade highs, and an economy that has been straddling a recession for the past year, the performance of Canada’s main index, the TSX in 2024 should have even the biggest bears taking notice.
After hitting a record high in January 2022, the TSX wandered in the wilderness, looking for direction for the rest of 2022 and 2023. It’s been a different story in 2024 with the TSX reaching a number of new record highs.
Most recently, on May 9, the TSX hit a record intra-day high of 22,426.97, topping the previous record high of 22,380.16 from April 9. As of this writing, the TSX is up 14% over the last six months and 8.6% year-over-year.
Will the TSX Hit Additional Fresh Highs?
While record highs are a bullish technical indicator, they can also lead investors to ask if stocks have risen too high and are overvalued. Investors may be reluctant to jump into stocks when the broader index is at record levels, but when it’s supported by underlying fundamental strength, record highs can result in a cluster of record highs.
The TSX was expected to perform well in 2024 but not this well. In February, analysts thought the TSX would rise slightly in 2024 before hitting fresh highs in 2025. So far this year, the big run on the TSX is being fuelled by strong performance with telecommunication stocks and resource shares.
The TSX is made up of 11 sectors, the energy and materials sector account for 32% of the index with the financial market representing 29% of the TSX’s weight. With the three top sectors—which represent 61% of the total market weight—performing well, there’s going to be solid momentum.
And this trend is expected to continue throughout the typically slow summer months. That optimism is being buoyed by strong commodity prices and earnings from some major Canadian companies, including record production and sales from Suncor Energy, an earnings beat from Manulife, an “outstanding” first quarter from Linamar, and robust performance from Telus.
Learn-To-Trade.com, Canada’s Leader in Stock Market Trading Courses
The TSX hit a new record high on May 9 with investors rewarding individual companies reporting strong first-quarter earnings. How will the TSX perform in the second quarter and back half of 2024? And are new record highs on the horizon? Ask the trading professionals at Learn-To-Trade.com.
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