TSX Overview

As the final trading session of the year unfolds, Canada’s primary stock index, the S&P/TSX composite index, is showing a modest upward trajectory, primarily propelled by a significant surge in energy stocks. The index rose by 84.04 points, marking a gain of 0.34% and ending the day at 24,704.63.

Despite this positive close, the TSX is on pace for a decline this December—its first drop in six months and the worst performance since May 2023. Factors contributing to this cautious sentiment include the U.S. Federal Reserve’s hawkish posture and existing domestic political uncertainties. The commodity-driven nature of the TSX has, however, provided some relief today, with the energy sector climbing 1%, closely mirroring a spike in oil prices triggered by encouraging data on China’s manufacturing activity.

Sector Performances

The communication services sector also emerged as a leader, gaining 1.4% throughout the day. However, it faces challenges as it is expected to finish the year with a staggering decline exceeding 20%. In contrast, the information technology sector, though experiencing a minor setback today, is anticipated to outperform its counterparts by the year's end.

Investment Insights

Investment experts like Allan Small, a senior advisor at Allan Small Financial Group, emphasize that the last trading day of the year tends to be positive historically. This has been corroborated by a substantial wave of stock purchases fueled by policy easing from major central banks, positioning the TSX for its most robust annual performance since 2021.

Market Outlook

Looking ahead, the market is bracing itself for whatever shifts might come with Donald Trump’s potential return to the White House. Small noted, 'Donald Trump measures his success based on stock market performance... and when U.S. markets excel, Canada typically follows.'

Global Markets

Globally, markets are also winding down for the year, with many closing for the New Year holiday on Wednesday. In the U.S., stock indexes struggled slightly during morning trading but remain poised for record gains, with the S&P 500 likely to finish the year up approximately 24%—its best performance since 1998, having achieved 57 record highs throughout 2024.

Key Drivers Behind Market Rally

This year, the driving force behind the impressive stock market rally has been the backdrop of a resilient economy characterized by strong consumer spending and job creation. Stocks within the booming artificial intelligence sector, like Nvidia, have reached astonishing heights, further lifting the entire market. Wall Street projects broad earnings growth exceeding 9% for S&P 500 companies, with final tallies coming after forthcoming fourth-quarter earnings reports.

Inflation and Economic Growth

Adding to the optimism, inflation has shown signs of retreating towards the Federal Reserve's 2% target, bolstering hopes for interest rate cuts in 2025, which would alleviate borrowing costs and promote further economic growth. However, caution still looms as concerns about inflation resurgence remain due to potential tariff hikes proposed by the incoming administration.

Cryptocurrency and Other Investments

Moreover, this year was notable not just for stocks as cryptocurrencies also surged, with Bitcoin soaring past $100,000, and gold reaching record highs, boasting a remarkable 26% annual gain.

Looking Ahead

As investors prepare for the upcoming holiday, they will closely monitor key metrics including employment data from both Canada and the U.S., insights that promise to shape future monetary policies.

Market Closure

Mark your calendars as the markets will be closed on Wednesday for New Year's Day, with important updates on U.S. construction spending and manufacturing set to be released in the following days! Will the momentum carry into the new year? Stay tuned!