The TSX Is at Record Levels and Is Expected to Rally Higher

The Toronto Stock Exchange, or TSX, has been rallying higher since bottoming in early April. That’s when U.S. President Donald Trump unveiled his “Liberation Day” global tariffs. Stocks sold off on fears of what a trade war with the U.S. would do to the global economy. 

The TSX, Canada’s main stock index, tumbled more than 10%, hitting a low of 22,227.74 on April 7. Since then, optimistic investors have brushed aside tariff fears with both Canadian and U.S. stocks rallying higher.

As of July 7, the TSX has notched up six consecutive days of record-high closings. On July 3, the TSX closed above 27,000 for the first time ever and on July 6, the TSX closed at a record 27,036. Year-to-date, the TSX has gained approximately 9.4%. The TSX has also advanced more than 21% since bottoming on April 7.

The big question is whether this bull run is here to stay. There are more than enough economic headwinds that could derail the bull run, but investors on both sides of the border believe the TSX could rally even higher.

Chances of a full-blown recession have evaporated. The Conference Board of Canada sees the Canadian economy growing 1.5% in 2025. Economic growth will be hampered by U.S. trade policies, but President Trump has, once again, paused his country-specific tariffs on U.S. imports from July 9 to August 1. 

President Trump’s decision to extend reciprocal tariffs until August 1 has provided some relief for exports. Despite the three-week reprice, Canadian Prime Minister Mark Carney has said he wants to come up with some sort of deal with the U.S. by July 21.

Will the TSX Rally Higher?

Nothing goes up forever, and stocks need a reason to climb higher. Investor sentiment and optimism only go so far. But there is reason to believe that the TSX will continue to notch up additional record highs over the coming quarters. 

In addition to avoiding a recession and eventually getting a trade deal done with the U.S., Canada’s position as a leader in finance, agriculture, technology, and energy puts it in a unique position for ongoing foreign investment.

Political moves in the U.S. could also help juice the TSX. The S&P 500 is also at record levels, with that bull run expected to continue. Why the optimism?

First-quarter U.S. corporate earnings were better than expected and are projected to rise 13.7% on an annual basis. It’s only early July, so we’ll have to wait a while before we know how S&P 500 stocks did in the second quarter.

Global stocks got a boost recently from easing fears about ongoing conflicts in the Middle East. 

U.S. inflation remains low at 2.4%. That’s slightly higher than 2.3% in May, but still lower than the long-term average. 

Should U.S. inflation remain low throughout the summer months, this could give the Federal Reserve confidence to cut interest rates as early as September. Lower interest rates encourage borrowing and should help energize the bull in both Canada and the U.S.

North American investor optimism was also buoyed by stronger-than-expected U.S. jobs growth in June. Here at home, Canada’s trade deficit narrowed in June, with exports rising and imports falling. 

Easing worries has resulted in lower volatility measures, too. The Cboe Volatility Index, or VIX, an options-based measure of investor anxiety, soared in early April, just after President Trump announced “Liberation Day.” The measure hit a high of 60, which was the highest level since the 2020 health crisis. It has since fallen and is currently at 17.5. Since 1990, the average daily close for the VIX has been around 19.50.

Learn-To-Trade.com, Canada’s Leader in Stock Market Trading Courses

Learn-To-Trade.com is Canada’s oldest and leading provider of stock market trading courses. Over the years, the experts at Learn-To-Trade.com have helped tens of thousands of Canadians, of every skill level, learn how to trade more confidently and profit more consistently. 

We also provide a unique, Lifetime Membership that allows you to re-attend any part of the program as often as you’d like.

To learn more about Learn-To-Trade.com’s stock market trading courses, contact us at 416-510-5560 or by e-mail at info@learn-to-trade.com.