What’s going on here?
Canadian stocks dipped yet again as falling commodity prices and a shift in investment momentum toward the US left the TSX in the red.
What does this mean?
The S&P/TSX composite index ended down 0.1% at 21,554.86 on Friday, capping its fifth straight weekly decline – the longest stretch since May 2023. The materials group took a 1.3% hit due to falling gold and copper prices, primarily driven by concerns over surplus supplies and tepid demand in China. Meanwhile, the energy sector dropped 1.4% as oil prices slipped to $80.73 per barrel. These two sectors combined account for 32% of the TSX’s weighting, making their performance crucial for the index. This downward trend was compounded by a broader momentum shift towards the US, where the S&P 500 has jumped 14.6% this year, largely fueled by a booming technology sector.
Why should I care?
For markets: Commodity blues hurt TSX sentiment.
Falling prices in critical commodities like gold, copper, and oil are dragging down the TSX, highlighting the vulnerability of a market heavily weighted in energy and materials. The technology sector’s 1.1% rise and consumer staples’ 0.5% increase were bright spots but not enough to offset the slump. As investors pivot towards the high-performing US tech market, Canadian stocks are left trailing.
The bigger picture: US tech shines, but Canadian stocks might be bargains.
The TSX is only up 2.9% this year compared to the S&P 500’s 14.6% gain. With Canadian assets trading at cheaper valuations globally and the TSX’s 12-month forward price-earnings ratio dropping to 13.9 from 14.7, there could be potential bargains for savvy investors willing to ride out the current downturn. This trend underscores the importance of diversification and highlights the global shift towards US tech stocks, driven by a hunt for higher returns.
