TSX: The Top Performing Index in 2025?

All eyes have been on U.S. stocks this year, but the biggest winner so far has been the Toronto Stock Exchange (TSX), Canada’s main index.

Despite a raft of global tariffs, weakening economic data, and higher costs, the S&P 500 and Nasdaq are both hovering near record levels. As of September 8, the S&P 500 is up 10.4% year to date while the red-hot Nasdaq has rallied 12%.

Strong gains, but the TSX has been having an even better year, gaining a whopping 27.2% year to date. The index is at record levels, but it’s going further than that. On September 4, it registered its seventh consecutive record close and, on September 5, it hit its eighth consecutive record intra-day high.

On September 5, the TSX Composite Index closed at 29050.63, besting the record closing high it posted on September 4 by 2.9%. Again, it was the eighth consecutive day of record closings.

The index also registered its eight consecutive day of record intra-day highs, hitting 29115.42, up from 28924.34 the day before. This represents the TSX’s best daily run since May. It was energized by financials, energy, and materials.

Together, the above three sectors account for approximately 63% of the TSX’s weighting. In addition to Canadian banks reporting robust results, the index is being juiced by strong gold prices and metal mining shares.

What’s Happening with the Canadian Economy?

The big gains come in spite of news from Statistics Canada that the Canadian economy lost 66,000 jobs in August. This comes after the Canadian economy lost 41,000 jobs in July. Economists had expected the Canadian economy to add 5,000 jobs in August.

Significant job losses were from tariff-sensitive industries, including manufacturing, transportation, and warehousing, but job losses also came from non-tariff-related areas, including the technical services, professional, and education sectors. This shows that the Canadian economy is facing broad-based weakness.

Meanwhile, Canada’s unemployment rate inched from 6.9% in July to 7.1% in August, the highest levels since the pandemic. If you exclude the pandemic, August’s reading represents the highest unemployment rate since May 2016. Economists were predicting that Canada’s unemployment rate would climb to seven percent. For context, this past January, the unemployment rate stood at 6.6%.

This data set also comes after earlier data showed that the Canadian economy shrank in the second quarter, with gross domestic product (GDP) falling by 1.6% at an annualized rate. It was the first quarterly contraction in almost two years.

Will the Bank of Canada Lower Interest Rates?

Even if the Canadian economy did add 5,000 jobs in August, this number is fairly low, and it was expected to result in the Bank of Canada lowering interest rates when it meets next on September 17. However, given the worse-than-expected reading for Canadian unemployment, job losses, and GDP, an interest rate cut seems to be a lock.

Before the unemployment data were released, Bay Street put the odds of a September interest rate cut at 55%. After the abysmal economic data came in, this number jumped to more than 70%.

The Bank of Canada has held its key interest rate steady at 2.75% for the last three straight meetings but it’s now expected to lower it by 25 basis points to 2.5%. Another rate cut could be in the cards later this year, too, which would bring interest rates down to 2.25% by the end of 2025.

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