Desjardins Predicts TSX Will Continue to Outperform the S&P 500 Amid U.S. Volatility

Canadian equities are standing strong amid rising U.S. political turbulence — and their momentum is likely to persist through next year, according to a new report from Desjardins Group.

The firm’s economists noted that the TSX has benefited from a backdrop of trade friction, policy uncertainty, and geopolitical tensions, providing investors with a relative safe haven.

“The TSX has effectively acted as a hedge against institutional instability, moving in step with gold prices as investors look for protection against potential U.S. dollar weakness,” the report stated.

Natural Resources: Canada’s Strategic Edge

A key driver behind the TSX’s resilience lies in its heavy exposure to natural resources and hard assets.
“In an environment where macro volatility remains elevated, this connection to tangible assets has become a defining strength for Canadian equities,” Desjardins said, adding that market strength now extends beyond commodities into other sectors.

Broader Market Breadth vs. U.S. Concentration

The report also highlighted that Canadian market gains are more evenly distributed, while U.S. indexes like the S&P 500 remain heavily concentrated in a handful of large tech names.

Looking ahead, Desjardins forecasts that the TSX will continue to outperform the S&P 500 in both 2025 and 2026.

“Historically, underweighting U.S. equities carried a high opportunity cost,” the firm said. “However, this year’s global outperformance and growing concentration risk within the S&P 500 could trigger a broader rotation away from U.S. markets — with some of that capital reallocating to Canada.”

Repricing Ahead

Desjardins believes this capital shift will also influence valuations:

“We expect U.S. multiples to contract modestly over the next year, while Canadian equities could benefit from steady inflows and relative valuation appeal,” the report concluded.

The takeaway? Amid rising global instability, the TSX’s balance of resource exposure and diversified performance may continue to make Canada a preferred destination for cautious investors.