U.S. President Donald Trump’s trade war is causing a reckoning on Canada’s benchmark stocks index, which is set to see an uptick in membership changes next month, Scotiabank analysts say.
The S&P/TSX Composite Index has outperformed the key U.S. gauge so far this year, climbing 3.3% compared to the S&P 500 Index’s 0.9% drop as of 1:03 p.m. Monday. At the same time, Canada’s stocks gauge has seen a wide discrepancy between winners and losers ahead of a planned rebalancing announcement on June 6. The measurement period that determines which stocks join the index began Friday and is expected to close on May 23.
“The trend of falling turnover since last September is expected to end,” Scotiabank analysts including Hugo Ste-Marie wrote in a Monday note. The total value of stocks joining and being removed from the index may reach its highest level since 2022.
Gains in Canada have primarily come from its large concentration of gold and silver miners, which have benefited as investors sought a safe haven while the U.S. imposed tariffs on its trading partners.
Two precious metals stocks are poised to join Canada’s big board — Discovery Silver Corp. and Allied Gold Corp. — as well as auction house operator RB Global Inc. “For adds, the smaller resource names have been on strong uptrends,” Ste-Marie writes.
Stocks being closely watched for index removal include firms hit hard by Trump’s tariffs such as Algoma Steel Group Inc., toymaker Spin Master Corp., and energy service companies Precision Drilling Corp. and Pason Systems Inc. Cannabis producer Tilray Brands Inc., which is on pace for its fourth straight yearly decline, may also be poised for deletion.
Geoffrey Morgan, Bloomberg News
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