Brian Belski, the chief investment strategist at BMO Capital Markets, shares his predictions for the S&P 500 and the TSX in 2025. He provides insights into market trends and what investors might expect for the coming year.
Canada’s stock market might finally take the lead over its U.S. counterpart next year, according to a fresh forecast from BMO. After years of trailing the S&P 500, the Toronto Stock Exchange’s (TSX) composite index is expected to outperform in Canadian dollar terms, gaining up to 200 basis points over the U.S. benchmark.
Brian Belski, BMO’s chief investment strategist, attributes this optimistic outlook to Canada’s blend of value, cyclicality, and growing opportunities in-stock selection. Speaking with BNN Bloomberg, Belski projected the TSX could hit 28,500 by the end of 2025, marking a nearly 15% increase from its current level, excluding dividends.
Key Sectors for Growth
For investors, Belski recommends focusing on Canadian real estate investment trusts (REITs) and financial stocks, which he sees as strong performers. Conversely, he anticipates weaker results in areas like healthcare, telecom, and consumer staples.
“You need to tread carefully and prioritize liquidity-rich sectors,” Belski advised. He also expressed long-term optimism for Canadian small-cap stocks, believing they have the potential to deliver substantial gains over the next decade.
U.S. Market Still in the Game
While Canada looks promising, Belski’s team also foresees solid gains for the S&P 500, projecting it to close 2025 at 6,700—a nearly 10% increase from its expected 2024 finish of 6,100. In the U.S., energy and materials sectors are likely to see notable growth, while healthcare could face challenges over the next 12 to 18 months.
On technology, Belski highlighted the sector’s dominant role in the U.S. market, comparing large-cap tech stocks to essential consumer staples. However, he is particularly bullish on smaller tech firms, predicting stronger earnings growth compared to their larger counterparts.
Challenges Ahead for Some Sectors
BMO needs to be more enthusiastic about Canadian utility and telecom stocks, citing concerns over their ability to sustain dividend growth. “We’ve reduced our earlier optimism for telecommunications,” Belski noted, adjusting the sector to market weight.
As for utilities, Belski believes the sector will struggle in the coming years, offering fewer value opportunities for investors.
A Promising Outlook for Canadian Stocks
Belski and his team are confident that Canada’s stock market holds better value prospects than the U.S. With the TSX set to climb and selective investments likely to pay off, 2025 could mark a turning point for Canadian equities.
