All of the major North American indices are in or near record territory. One of the best performing is the TSX. Since the start of October, the TSX has rallied 4.6% and crossed the 21,000 threshold for the first time ever. And despite the slight pullback in energy stocks, the TSX has notched up 10 straight wins.
With companies reporting strong earnings, the outlook for the TSX for the rest of 2021 remains bullish with that momentum expected to continue deep into 2022.
Why Is the TSX Doing So Well?
The TSX has been on a roll with Canada’s main stock market continuing to climb into record territory. As of this writing, the TSX is up 21% year-to-date and 30% year-over-year.
That’s better than the Dow Jones Industrial Average, which is up 16% year-to-date and 15% year-over-year. That run also puts the TSX on the same trajectory as the S&P 500, which has climbed 20% year-to-date and 31% year-over-year, and the technology-heavy NASDAQ, which has advanced 17% in 2021 and 31% year-over-year.
The big rally is being juiced in large part by the runup in commodity prices; oil is up 70% this year and is trading above $82.00 per barrel, with many analysts predicting it will top $100 per barrel over the coming months. Crude’s big moves come on the heels of the global economic recovery and supply/demand imbalance. The materials sector, which includes precious and base miners and fertilizer companies is also helping send the TSX higher.
It’s not just commodities propelling the TSX higher. Financials, which account for nearly 33% of the TSX’s market value, are also performing well. In addition to being some of the strongest banks in the world, Canadian financial stocks are also expected to benefit from higher interest rates and loan growth.
Canada’s red-hot tech sector, which is led by Shopify Inc (TSX:SHOP) and Constellation Software Inc (TSX:CSU), has already set a full-year record for venture capital fund raising, which was previously set during the dot-com bubble. During the first nine months of 2021, 427 companies raised $10.92 billion in venture capital.
In 2019, Canadian tech stocks raised $7.57 billion, which is higher than the $6.71 billion in venture capital raised in 2000, but when adjusted for inflation, that number would be equal to around $10 billion today.
That momentum is expected to continue well into 2022, with the TSX expected to hit 22,000 by the end of the year. That would only represent a 4.7% gain from current levels. Keep in mind, analysts are notoriously conservative, and investors can be overly optimistic, so that target might be a little light. Analysts had initially said the TSX would expand to 20,020 in 2021.
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The TSX continues to push into record levels and remains one of the best performing indexes of 2021. Thanks to strong financial results and economic growth, those record moves are expected to continue throughout 2022. Some sectors will do better than others though. With help from the trading experts at Learn-To-Trade.com, investors will learn how to read economic cycles, spot market trends, and become more confident, profitable traders.
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