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For only the third time in the past 15 years we saw Canada’s TSX Index generate a higher annual return than the U.S. S&P500 Index in 2025. Going into the last trading day of the year, the TSX is sporting a gain of over 28% while the S&P500 is ahead by about 18%. Headlining the Canadian market’s outperformance in the past year was a rise of over 90% in the Basic Materials sector, which is mostly the gold stocks. In fact, the gold stocks alone accounted for over 1/3 of the overall market gain in the past year despite having just a 12% weight in the index. Although the AI (artificial intelligence) craze continued in the U.S. and most global markets, the price gains for most of the big names were much more muted in 2025 as excessive valuations and some growing trepidation about both the sustainability and constitution of that sector’s growth was brought into question. Despite the market weakness and economic angst early in the year about the impact of the Trump tariffs, the reality has proved less dire (thus far) as many threatened reciprocal tariffs were rescinded, some of the Liberation Day tariff levels were reduced and companies have initially absorbed the cost increases. But the full economic impacts have yet to fully flow through and there were some offsets as the continued massive spending on AI infrastructure as well as increased government fiscal spending blunted the negative influences. U.S. markets have so far remained astonishingly dominant. Since the 2008-09 global financial crisis, U.S. equities have outperformed the rest of the world’s markets by 7% annually, compounded. They have also dominated the largest companies with about two-thirds of global listed equity market capitalization residing in the U.S. The past year shows that trend might be on the verge of changing. European, Asian and emerging markets all had higher returns than the U.S. in 2025.
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