Media reports indicated that the Canadian stock market achieved a record high in July 2024 and has increased by 8% so far this year. Despite this uptrend, it could not keep pace with the S&P 500, which has gained almost 15% since the start of 2024.

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In the US, mega-cap equities with a market value of more than $200bn were behind the spike in rallies, while Canada’s performance relied on a wider spread across the canvas of listed stocks. It seems that Canada is catching up with its southern neighbour as rallies in US markets are reined in. In an interview, the chief investment strategist at BMO Capital Markets, Brian Belski, said:

This underperformance is NOT fundamentally justified. Canada is positioned for a significant catch-up trade, with Canadian small cap particularly well positioned.

He further stated that lower interest rates, a spike in earnings and “broader stock leadership” may give Canada the impetus needed to surpass the US. According to Bloomberg, Belski referred to the 3% rise in the S&P/TSX Composite Index and a loss of momentum in the S&P 500 to support his view.

The Bank of Canada is set to cut interest rates for the second time in a row, which bodes well for the country’s high yields. Belski added that Canadian stocks were doing well despite a negative outlook on the country’s economy.

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