The S&P/TSX Composite index has surpassed the 30,000 mark, driven by a significant rise in gold prices and the performance of Canada’s major banks. This milestone comes after a brief decline last week, which was triggered by renewed tariff tensions between the United States and China. However, the market has rebounded, buoyed by record-setting gold prices that have surged nearly 60% year-to-date.

Greg Taylor, chief investment officer at PenderFund Capital Management Ltd., noted, "I think this is the market climbing the wall of worry, and we’re also seeing just a really nice rotation to the commodities, which Canada’s overweight. And the gold move has been tremendous, and I think that’s been the big driver for this."

Gold mining companies have played a crucial role in this upward trend, with six of the top ten gainers on the TSX being precious metal firms. Craig Basinger, chief market strategist at Purpose Investments Inc., remarked, "The real star has been the gold miners, which are flying." He added that gold has contributed $6.4 billion in earnings for the TSX in 2023, with an estimated $23.5 billion expected over the next four quarters. Basinger likened gold's impact on the TSX to that of artificial intelligence on the U.S. market, stating, "Gold is the TSX’s version of an AI booster."

In addition to gold, Canada’s big banks have also contributed to the TSX's performance. Taylor commented on the banking sector, saying, "Banks are really interesting because they’re not showing a ton of growth, but I think they were probably a little oversold and forgotten, and I think they’re (on) such a good run."

Investor sentiment appears to be shifting as those who were previously sidelined are now entering the market, driven by a fear of missing out on the ongoing bull run. Taylor explained, "A lot of people, given the headlines, were sitting in cash and overallocated to cash versus equities, just waiting for a pullback. And that pullback hasn’t come."

Looking ahead, Taylor expressed concerns that gold miners may be "overbought" and suggested a pullback could be on the horizon. He emphasized the importance of monitoring the banking sector, which is currently facing challenges due to concerns about small U.S. banks and their exposure to private credit. While Canadian banking CEOs have reassured investors, Taylor warned that any issues in the U.S. could have repercussions in Canada due to the interconnectedness of the financial systems.

As Canada approaches its earnings season, Taylor anticipates potential volatility, particularly in light of ongoing tariff discussions with the U.S. Basinger noted the rarity of simultaneous gains across the TSX, S&P 500, and international markets, stating, "It is very rare to have all three up this much at the same time. It certainly has increased the desire to take some profits or turn a bit more defensive. It can keep running, but we are in rarefied territory."