Canada’s stock market extended its winning streak in Q3 2025, setting new records even as the economy showed signs of strain. The Morningstar Canada Index rose an impressive 12.75% during the quarter, far surpassing the 8.20% gain of the U.S. benchmark. Year to date, Canadian equities are up 24.37%, easily outpacing the 14.57% climb in U.S. markets.
This rally came despite weaker economic data that pushed the Bank of Canada to resume interest rate cuts on September 17, and amid uncertainty caused by fluctuating U.S. tariff policies. Analysts say this resilience highlights the clear separation between Canada’s economic performance and its equity market strength.
“Despite slower growth and higher unemployment, the S&P/TSX Composite Index has delivered robust returns through the first three quarters,” says Philip Petursson, Chief Investment Strategist at IG Wealth Management.
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Broad-Based Momentum Across Sectors
The Canadian market’s strength is rooted in low valuations, strong foreign capital inflows, and secular demand across key sectors. Precious metals miners were standout performers as gold and silver extended their rallies, but gains also came from financials, technology, consumer discretionary, and energy.
Jack Manley, Global Market Strategist at J.P. Morgan Asset Management, credits Canada’s performance to its high-quality cyclical exposure, making it attractive in volatile times.
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Safe Haven From U.S. Volatility
In contrast, U.S. markets have been shaken by tariff disputes, fiscal concerns, and uncertainty over the Federal Reserve’s independence. Elevated U.S. valuations have also prompted investors to diversify geographically, shifting capital toward cheaper and more stable markets like Canada.
“A desire for political stability and more attractive valuations has finally put the spotlight on markets beyond the U.S.,” Petursson notes.
Sector Leaders Driving Returns
- Basic materials (14.43% of the index) were the top contributors, adding 5.26 percentage points to quarterly gains.
- Financials, Canada’s largest sector at 33.35%, added 3.61 points.
- Energy (16.16%) contributed 1.95 points, and
- Technology (10.56%) added 1.28 points on strong structural tailwinds.
Bottom line: While Canada’s economy faces headwinds, its stock market fundamentals, sector diversity, and attractive valuations have created a powerful magnet for global investors seeking stability and upside.
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