North American markets surge to historic levels

North American equity markets displayed strength this week, with Canada’s S&P/TSX Composite Index and America’s Dow Jones Industrial Average (DJIA) reaching all-time highs on Wednesday, 12th of October. The simultaneous strength in both Canadian and U.S. markets highlights the broad-based optimism driving North American equities as investors navigate a mix of strong earnings, labor market resilience, and political developments. Let’s take a closer look:

S&P/TSX composite index reached an all-time high 

Canada’s benchmark S&P/TSX Composite Index reached an all-time high on Wednesday. The index surged 418.33 points, climbing 1.38% to close at 30,827.58, eclipsing its previous record established on October 15.

Daily S&P/TSX Composite Index Chart – Source: TradingView

Unprecedented momentum

The TSX’s performance reflects great momentum that has built throughout recent weeks. Over four consecutive trading sessions, the index has accumulated gains of 958.99 points, representing a 3.21% advance—marking its most substantial four-day rally since April 2025.

This upward trajectory extends to a broader pattern, with the index posting gains in eight of the past ten trading days, its longest winning streak since early October.

The year-to-date picture reveals even more impressive gains. The TSX has climbed 24.67%, adding 6,099.64 points to its value. This performance builds on strong momentum from previous years, following an 8% gain in 2022 and nearly 18% in 2023. From its 52-week low reached in April, the index has soared an exceptional 36.97%, underscoring the powerful recovery and expansion in Canadian equity valuations.

Drivers of Canadian market strength

Market analysts mostly attribute the TSX’s record performance to strong third-quarter corporate earnings that have exceeded expectations, with particularly robust results from metal mining companies and major food retailer Loblaw driving Wednesday’s gains. This earnings strength has reinforced investor confidence that corporate profitability will continue expanding into 2026.

Beyond individual company performance, improving macroeconomic conditions have bolstered market sentiment. Canada’s labor market delivered a surprising rebound in October, adding 66,600 net new jobs following September’s gain of 60,400 positions. These additions helped reverse losses from July and August, while the unemployment rate declined from 7.1% to 6.9%, moving away from near nine-year highs excluding pandemic levels.

This employment recovery is particularly noteworthy given the headwinds facing the Canadian economy. U.S. tariffs implemented under the Trump administration have created significant challenges for Canadian growth and hiring, especially in steel production, automotive manufacturing, and related industrial sectors. The labor market’s resilience despite these pressures suggests underlying economic strength that has encouraged equity investors.

US markets break through key kevels

South of the border, American markets joined the rally as political uncertainty receded. The Dow crossed the 48,000 threshold for the first time yesterday, gaining 328 points in Wednesday’s session. This milestone represents the Dow’s 17th record close of the year, contributing to a solid 13% year-to-date advance.

The Dow’s climb was powered by strong performances from major components including UnitedHealth and Goldman Sachs, while technology giant IBM reached its own record high following impressive quarterly results. However, despite these gains, the Dow continues to lag behind other major U.S. benchmarks. The S&P 500 has advanced 16% year-to-date, while the technology-heavy Nasdaq has surged 21%, reflecting stronger performance in growth-oriented sectors.

Daily Dow Jones Industrial Average Index Chart – Source: ActivTrader

Political resolution in the US lifts sentiment

A significant catalyst for the recent market advance was the resolution of the longest U.S. government shutdown on record, which concluded on Wednesday. The end of the impasse had investors set aside concerns about elevated valuations in artificial intelligence stocks and focus instead on the potential stability provided by resumed federal operations.

However, the resolution may prove temporary. The funding agreement extends government financing only until January 30, setting up another potential confrontation in early 2026. More concerning for long-term fiscal stability, the deal does nothing to address the nation’s mounting debt burden, which is projected to increase by approximately $1.8 trillion annually on top of the existing $38 trillion total.

What to expect now? Data flows and market implications

Economic data releases

The reopening of the federal government signals that a substantial backlog of economic data will begin flowing to markets in the coming weeks. Multiple critical releases were delayed during the shutdown, spanning several weeks of missing information. As agencies including the Labor Department and Commerce Department resume full operations, market participants should anticipate a period of catch-up that may affect data quality and timing, as well as markets’ performances.

Goldman Sachs analysts project that if the government achieves full operational status by week’s end, the Bureau of Labor Statistics will publish an updated schedule for economic releases early next week. Morgan Stanley economists expect the September nonfarm payrolls report to arrive within days of full reopening, as the underlying survey data had already been collected before the shutdown.

The October employment report, however, presents more complications. This release may be delayed longer and could arrive without certain components, potentially including the unemployment rate itself. Such gaps would represent unusual challenges for analysts and policymakers attempting to assess economic conditions accurately.

Federal reserve considerations

These data complications arrive at a critical moment for the U.S. monetary policy. Federal Reserve Chair Jerome Powell has emphasized that labor market conditions have assumed greater importance in recent policy deliberations compared to inflation metrics in the central bank’s dual mandate to maximize employment and stabilize prices.

Incomplete or delayed labor market data could complicate the Fed’s December policy meeting, potentially affecting decisions about interest rate adjustments. Market participants will need to monitor both the flow of delayed data releases and Fed communications carefully to gauge how policymakers are interpreting economic conditions amid these information gaps.

Bottom line

For the near term, investors appear focused on positive catalysts, with strong earnings and improving economic data outweighing concerns about high valuations, as well as political and fiscal challenges. We’ll soon know if this optimism is warranted, as the return of regular economic data will provide the key information needed to assess fundamental conditions.

As both markets digest these record closes and look toward year-end, the interplay between strong corporate performance, labor market resilience, political uncertainty, and monetary policy will likely determine whether 2025 concludes with further gains or a period of consolidation at these elevated levels.

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