TORONTO – Trade turmoil and worries about a possible recession in Canada in the first half of the year were no match for the S&P/TSX composite index as surging gold prices swooped in to carry the benchmark index to new heights.
Fund managers still think gold will help the TSX notch new gains in 2026 — to a lesser extent, considering its big run up. But they’re also eyeing other sectors that could rise along with potential risks on the horizon, like the upcoming review of the Canada-U.S.-Mexico trade agreement.
Philip Petursson, chief investment strategist at IG Wealth Management, said soaring gold prices sent stocks in that area of the market up “over 100 per cent or more in some cases.”
Gold kicked off 2025 trading around US$2,600 an ounce, and was hovering around the US$4,500 mark in late December.
Petursson said there’s still likely some further upside for gold next year, but investors should have more realistic expectations.
“We don’t think gold will be up another 50 per cent, but we think given the deficits, given the projected interest rate environment and given the continued demand for the yellow metal itself, these are positives to see the price of gold continue to move up,” he said in an interview.
Petursson said he thinks the “big money’s been made,” but that gold companies will still benefit from any incremental moves higher in the commodity price.
In contrast to the TSX, U.S. indexes have been mainly pushed higher by large-cap technology companies in 2025. However, with some concerns around the dominance of AI stocks, Petursson said exposure to the TSX is a “fantastic hedge against an AI index like the S&P 500.”
Going into next year, Petursson said he is overweight in equities and underweight fixed income. Since he sees a lower risk of recession in Canada and the U.S., a shock to equity markets is unlikely.
Brent Joyce, chief investment strategist at BMO Private Wealth, said other areas of the market, including energy and industrials, could see some positive catalysts and “maybe take a bit of that baton from the gold sector” next year.
“The notion that the world is awash in oil, you can certainly make an argument and look at that as being true, but that supply-demand is narrowing a little bit,” Joyce said.
He added that if there is stronger-than-expected global growth next year, that could put upward pressure on oil prices, which could in turn benefit the Canadian energy sector.
Oil prices experienced volatility throughout 2025, starting the year slightly above the US$70 per barrel level, and finishing it below US$60.
Within the industrials segment, Joyce said that while major rail companies are facing some level of trade uncertainty, they could benefit from the outcome of trade negotiations between the U.S., Canada and Mexico.
With North American trade officials preparing for a review of the Canada-U.S.-Mexico agreement, or CUSMA, next year, Joyce said railway companies are “heavyweights” in the TSX industrial segment.
A better-than-expected outcome in U.S.-Canada-Mexico trade negotiations would mean “there’s room for upside” for industrials on the TSX, he added.
Nation-building infrastructure projects have been a key focus for Prime Minister Mark Carney’s government. Some initiatives being referred to the new major projects office for an expedited review include an LNG export terminal in British Columbia and critical mineral mines in Ontario, Quebec and New Brunswick.
Going into next year, Brianne Gardner, senior wealth manager of Velocity Investment Partners at Raymond James, said she expects “moderate growth” on the TSX supported by the materials sector.
She said she also thinks Canadian banks will maintain their “solid performance.”
In 2025, Canada’s big banks proved their ability to withstand a variety of challenges once again. Earlier in December, the Big Six banks reported profits totalling $16.45 billion for the fourth quarter alone, up from $14.73 billion last year as they largely shrugged off the effects of immense trade uncertainty with the United States.
“Lending has increased even though we are expected to continue to see rates go down. I think we have that consistent loan demand as well. For us, we still expect to see the Canadian market do well,” Gardner said, adding she anticipates the Canadian market to slightly underperform its U.S. counterpart.
She highlighted recession risks and sluggish economic growth as potential headwinds for the TSX next year.
“That is reflecting softer consumer spending and weak business investment,” Gardner said.
Canada’s economy saw muted growth in 2025, but avoided a technical recession, or two consecutive quarters of declining gross domestic product, based on third-quarter GDP figures released in November.
Statistics Canada reported real GDP rose 2.6 per cent on an annualized basis in the third quarter, rebounding from a contraction of 1.8 per cent in the second quarter.
Going forward, she said she expects slower growth in Canada and a “shallow soft patch scenario, not necessarily a recession.”
“I think the risk to Canadian investors right now is potentially weaker economic growth. If we see slower domestic growth, (it) could weigh on equity performance,” Gardner said.
Other risks to Canada’s benchmark index include the possibility of more tariffs as the CUSMA review kicks off, she said.
“If we do get additional tariffs on the goods that are up for renewal next year, I do think it will have an impact on the stock market, at least short term, until it flows through the economy,” Gardner said.
She added that increased tariffs would have an impact on the balance sheets of Canadian firms and “it certainly could cause some volatility in the markets.”
This report by The Canadian Press was first published Dec. 28, 2025.
