The Canadian stock market wrapped up a robust year in 2025, with the benchmark S&P/TSX Composite Index posting a significant annual gain. The index advanced by 1.05 per cent in December, providing a positive finish to a year that saw a substantial 28.3 per cent price return overall.
Sector Performance: A Mixed December Picture
December's trading activity revealed a split among the market's sectors. Five sectors recorded positive price returns for the month, while six reported losses. The leading sectors driving the index higher were financials, materials, health care, consumer discretionary, and industrials.
Financials led the rally with a strong 4.2 per cent gain, followed by materials at 2.6 per cent. Health care stocks rose 1.8 per cent, consumer discretionary gained 1.4 per cent, and industrials edged up 0.3 per cent.
On the downside, the technology sector experienced the largest decline, falling 2.8 per cent. Utilities dropped 2.7 per cent, energy retreated 2.4 per cent, and communication services decreased by 1 per cent.
Top Performers and Revised Analyst Outlooks
Several individual stocks stood out with exceptional gains during the final month of the year. The top ten performers in the TSX Composite Index for December were:
- TerraVest Industries Inc. (TVK-T), up 30 per cent
- G Mining Ventures Corp. (GMIN-T), up 25 per cent
- EQB Inc. (EQB-T), up 20 per cent
- Laurentian Bank of Canada (LB-T), up 18 per cent
- TFI International Inc. (TFII-T), up 16 per cent
- First Quantum Minerals Ltd. (FM-T), up 16 per cent
- Aecon Group Inc. (ARE-T), up 15 per cent
- Hudbay Minerals Inc. (HBM-T), up 14 per cent
- Lundin Mining Corp. (LUN-T), up 13 per cent
- NFI Group Inc. (NFI-T), up 13 per cent
Analysts also revised their outlooks for several companies upward over the past month. Notable increases in average target prices include Laurentian Bank of Canada, which saw a 34 per cent revision to $30.22, and Canadian Imperial Bank of Commerce (CM-T), with a 10 per cent increase to $130.15.
Valuation and a Note of Caution on Forecasts
As of December 31, the S&P/TSX Composite Index was trading at a price-to-earnings multiple of 16.7 times the consensus earnings estimate for 2026, based on Bloomberg data. Earnings estimates continue to rise, with expectations of 15 per cent growth over the next twelve months.
While analyst target prices provide a forward-looking view based on financial models like discounted cash flow analysis, investors are advised to exercise caution. Extremely high target prices implying unbelievable returns can sometimes be unrealistic, especially if a stock's price has fallen and analysts maintain bullish expectations. An outlier target from a single analyst can also skew the average, particularly for stocks with low coverage.
The key takeaway for investors is to look beyond enticing projected gains. It remains critical to evaluate a company's fundamentals and the broader industry context before making any investment decisions, rather than being lured by a single headline number.
