Canadian and US Stock Market Set New Records: Everything You Need to Know

The North American financial landscape painted an impressive picture yesterday as both the US and Canadian stock markets notched new records. The S&P/TSX composite index modestly surpassed its previous closing high record, set in March 2022, by closing up 41.55 points at 22,087.26. This incremental gain speaks volumes about the underlying strength of the Canadian market, which has seen a 5.39% rise in 2024. This is fueled largely by surging oil and metal prices and the expectations for BoC rate cuts.

The composition of the S&P/TSX composite index reflects this robustness, with energy and metal companies—making up around 30% of the market's weight in Toronto—dominating the list of top gainers in 2024. Colin Cieszynski, the chief market strategist at SIA Wealth Management, remains bullish on the Canadian market's trajectory. He anticipates a renaissance in China's demand for materials, which could trigger a surge in commodity prices and boost resource stocks.

In New York, the three major indexes reached new heights. This surge in the U.S. has led Société Générale analysts to revise their year-end target for the S&P 500 to 5,500, up from 4,750, suggesting a further ascent of just over 5%.

U.S. equities' robust performance is built on a strong macroeconomic foundation and vigorous corporate earnings growth. Société Générale highlights three themes fortifying this outlook: the reshoring wave, the AI wave, and credit improvement. The reshoring wave is seeing U.S. companies bring businesses back home, while the AI wave continues to propel market indices to new heights. Credit improvement, with better lending standards, augments the positive sentiment toward the American financial sector.

Investor optimism has been further bolstered by the latest interest rate announcement from the Bank of Canada and the U.S. Federal Reserve. Stan Wong of Scotia Wealth Management comments that North American markets are in a "glass half full" mode, with data suggesting the likelihood of avoiding the much-feared recession from last year. Investors feel they are in an "economic sweet spot," with expectations of a soft landing for the economy and forthcoming rate cuts by central banks, which should keep the market buoyant.