Donald Trump has just unleashed the worst tariffs since The Depression, effectively stifling trade and destroying a trade deal he negotiated. The US president has also openly discussed annexing Canada, sparking unprecedented tensions between the two longtime allies. Political turmoil added to the turmoil in the North.

Then Trump backed away from his most punitive tariffs. Technocrat Mark Carney took over as prime minister, easing financial market woes and cooling tensions with his US counterpart. And, it turns out, the Canadian economy – driven by miners and famous international financial companies – is perfectly positioned for the chaos of Trump’s new world order.

The S&P/TSX has surged more than 40% from an April 8 low, putting the gauge on track to end 2025 with a 29% gain, trailing only 2009’s 31% gain for the best ever. The index hit a record 63 new all-time highs, due to a steady march higher in the last seven months of the year.

Mining and banking stocks have been at the center of the rally, with the materials subindex doubling on the back of rallies in gold, silver, copper and palladium. The financial group jumped 40%. Tech darlings love it Shopify Inc. and Celestica Inc. also contributed, moving the index a combined 11% higher on the year.

“The numbers themselves are pretty jaw-dropping,” IG Wealth Management chief investment strategist Philip Petursson said by phone. “But, I mean, you can sit there and say it’s still a balanced market that’s going to change even more in 2026.”

The fuel for the rally that powered precious metals to new records may not be expendable. Three Federal Reserve rate cuts are a boon to an asset class that pays no interest. The US central bank is expected to cut twice in 2026.

Gold and silver also serve as a safe haven for traders concerned about uncertainty surrounding US trade policies and geopolitical tensions in Europe and the Middle East. None of these concerns have completely subsided.

Petursson said he sees more runway for gold prices to continue to support the S&P/TSX Composite index, but not at the same level the markets saw last year.

“It would be foolish to just extrapolate this year’s gains to 2026,” he said, noting that “the fundamentals are still there” as central banks are expected to continue cutting rates.

Canada’s Big Six banks, including Toronto-Dominion and Bank of Montrealposted stronger earnings than expected throughout the year with annual adjusted earnings ahead of Bloomberg consensus expectations by an average of 2 percentage points.

The group of financial companies, including insurers and small banks, accounts for 33% of the Canadian index. They, too, enjoy lower rates in the US and Canada, with income from dealmaking and a better batch of loans that require less set-aside. The group’s advance in Canada is almost double that of its US counterparts.

There are some concerns over the group’s performance heading into 2026. The bank’s estimates were raised at the same time that the Canadian economy may begin to feel the weight of higher tariffs, said Craig Basinger, chief market strategist at Purpose Investments.

“Gold, energy: those sectors don’t really care about the Canadian economy, but the banks probably should,” Basinger said. “And this doesn’t seem like the time to pay a valuation premium for Canadian banks.”

The S&P/TSX Composite banking subindex’s price to earnings ratio reached nearly 15, up from a low of 9.7 in 2022.

The Canadian index’s record came despite one of the worst years for crude oil prices in recent memory. The problem, however, is the outlook for oil remains muted at best. Basinger said the jump in oil and gas stocks at the start of the year was a contrarian move given how demand has struggled to keep up with supply.

The market will also be vulnerable to any turmoil in the precious metal markets. Already, silver is sliding at the end of the year, despite being on track for a record gain.

Bassinger’s firm took a partial underweight position in the S&P/TSX Composite in the fourth quarter, which he said was more about profit-taking after “three straight years of big gains” than any negative view of the index.

If the new year brings surprises in oil, then strategists like Petursson say the S&P/TSX Composite is a good way for foreign investors to use the energy game. For Petursson, the answer to the question of whether investors can successfully put their money outside the US is “yes”, and there are many options in other markets such as Canada, Asia and Europe.

“If foreign investors are looking for pockets of opportunity, if the TSX is not on their radar, I think it is now,” Petursson said.