a fresh record, extending its streak of gains for a 13th straight day, its longest run in 35 years. According to the market analyst, large weighting in banks and commodity stocks saw the benchmark rise about 22 per cent this year, despite the recent decline in retail sales in Canada.
Preliminary estimate published by Statistics Canada reveal that in the month of September, retail sales fell 1.9 per cent as a result of supply-chain issues and other factors, which did not hamper the recent rally, as consumer stocks make up a small percentage of the TSX. The exchange is heavily weighted toward the financial industry, oil and gas companies and materials stocks, which make up about 57 per cent of the Canadian benchmark.
“Canada’s big three sectors have little quarrel with inflation – energy and materials naturally fare well when commodities are in favour, while financials are benefitting from a steeper yield curve and the solid credit gains that underpin the inflation pressure,” Douglas Porter, Bank of Montreal’s Chief Economist said in a note.
According to the vice president of Fiera Capital Corp., Candice Bangsund, the earnings of cyclical-value oriented sectors which dominate the S&P/TSX have benefitted from accelerating inflation, higher commodity prices and rising bond yields, as a result of the “reflationary environment of healthy growth”. “It has rarely been this cheap versus its global peers, with ample room for Canadian stocks to outperform,” she noted.
Canada’s stock market has also been flooded by foreign investors this year. Reports show that the nation’s equities are on track to add more than US$22 billion as of the end of August, which would amount to the highest net inflow from overseas investors since 2017.
