According to CIBC Capital Markets, about 60% of the revenue earned by companies listed on the Toronto Stock Exchange comes from foreign currencies rather than the Canadian dollar. (AP Photo/Jim Cole, File) · ASSOCIATED PRESS
A sliding U.S. dollar is expected to give a solid boost to Canadian stocks in 2025, particularly for companies with strong foreign earnings. Analysts at CIBC Capital Markets predict the S&P/TSX Composite Index will climb as businesses capitalize on currency shifts, high gold prices, and concerns over the U.S. economy.
A Weaker Dollar, A Stronger TSX
CIBC analyst Ian de Verteuil believes the Canadian stock market will benefit as the U.S. dollar struggles. Despite multiple tariff rounds imposed by President Donald Trump, the greenback remains weak due to economic uncertainty. Some speculate the White House could take steps to further devalue the currency through a possible “Mar-a-Lago Accord,” aiming to strengthen U.S. industries and manage foreign debt.
With the U.S. dollar under pressure, the S&P/TSX Composite Index stands to gain. A weaker American currency makes Canadian exports more competitive, and businesses reporting in Canadian dollars but earning foreign revenue will see boosted earnings when converting profits.
Gold Prices and TSX’s Golden Opportunity
Adding to the TSX’s strength is the recent surge in gold prices. Last week, gold crossed the US$3,000 per ounce mark for the first time. Given that gold companies make up around 10% of the TSX’s market capitalization, the rally in precious metals directly benefits the index. A weaker U.S. dollar tends to push gold prices higher, further strengthening Canadian mining stocks.
Foreign Revenue: A Game Changer for TSX-Listed Firms
One of the biggest advantages for Canadian companies comes from foreign earnings. De Verteuil estimates that about 60% of TSX-listed companies’ revenues come from outside Canada. This international exposure means that firms converting earnings from stronger foreign currencies into Canadian dollars will report higher profits in 2025.
“The companies that generate significant revenue outside Canada but report earnings in Canadian dollars are positioned to be the biggest winners,” De Verteuil noted. These firms not only benefit from geographic diversification but also stand to see earnings surprises in the first half of 2025 as currency exchange rates work in their favour.
Oil and Gas Sector: A Different Story
While many Canadian companies benefit from currency fluctuations, oil and gas producers face mixed results. These firms earn revenue in U.S. dollars but spend in Canadian dollars. However, volatile commodity prices in the U.S. dollar market overshadow any advantages from currency shifts, making their gains less predictable.
CIBC Capital Markets has identified several TSX 60 companies with significant foreign revenue exposure that are poised for growth in 2025. Investors looking for opportunities may want to focus on these firms as they take advantage of currency tailwinds and global market trends.
