Canadian stocks close out best year since 2009, led by energy

Canadian stocks closed out their best year in over a decade amid a rebound in oil prices, despite the S&P/TSX Composite Index dipping on the last trading day of 2021.

Canadian stocks closed out their best year in over a decade amid a rebound in oil prices, despite the S&P/TSX Composite Index dipping on the last trading day of 2021.

The benchmark rose 22 per cent this year, its best annual performance since a roughly 31 per cent rise in 2009. It was buoyed by a resurgence in energy stocks, which had underperformed for several years but rebounded in 2021 along with crude prices as demand bounced back from the pandemic. 

“Coincidentally, (2009) was the year coming out of the last bear market,” said Craig Basinger, chief market strategist at Purpose Investments Inc. in Toronto, referring to the recovery that followed the 2008 financial crisis. Basinger said Canada’s benchmark index performs well during economic rebounds, and did so again this year as the world recovered from the initial outbreak of the COVID-19 pandemic.

Despite its best year in over a decade, the key Canadian index still underperformed its U.S. counterpart by about five percentage points. The S&P 500 Index rose 27 per cent and posted 70 record highs in 2021.

Canada’s financial and energy industries account for the majority of the rise in the Composite index this year, said Jeff Mo, portfolio manager with Mawer Investment Management in Calgary. “It’s a very narrow universe, where you have a situation where two sectors are contributing to 75 per cent of the performance,” he said, adding that U.S. equity performance was more broad-based.