04:32 PM EDT, 09/26/2025 (MT Newswires) -- The Toronto Stock Exchange closed higher for the first time in four sessions Friday, albeit modestly, as Canada's gross domestic product rebounded in July though momentum is seen at risk, while, BMO raised its year-end target for the exchange to 31,500 and earning per share (EPS) target to $1,650 and National Bank left its asset mix unchanged this month with the index having "performed exceptionally well" since June.

Buoyed by higher commodity prices, the resources-heavy S&P/TSX Composite Index closed up 29.3 points to 29,761.28 with most sectors higher, even if none were up by even as much as 0.6%. Info Tech was down 2%.

National Bank noted the Canadian economy rebounded in July, growing 0.2% after edging down 0.1% in June, marking a first increase to GDP in four months. This was above consensus expectations for the month for a 0.1% lift.

National noted the Statistics Canada advance estimates suggest GDP was essentially flat in August, as gains in wholesale and retail trade were offset by declines in mining, manufacturing, and transportation. Taken together with the July print, National said, growth is on track for only a modest expansion in the third quarter following a significant pullback in Q2.

"While July's rebound offers some relief, the economy remains vulnerable, with business investment and hiring intentions still subdued. The latest easing by the Bank of Canada will not be sufficient to reinvigorate the Canadian economy in the short term as the lack of visibility for businesses should continue to be a constraint on the economy. We will have to wait until early November to assess the extent to which the federal government will be able to counterbalance the current headwinds," National noted.

Brian Belski, Chief Investment Strategist at BMO Capital Markets, noted in his latest 'Canadian Strategy Snapshot' the stock market recovery that "no one believed, was widely panned and even more loudly doubted" when BMO first published its view that Canada was entering a prolonged period of outperformance relative to the United States in mid-2024, has reached heights that "even we thought were lofty".

Yes, Belski said, the TSX has eclipsed BMO's base case of 28,500 in part to surprising economic strength and sustained gold momentum. "However, MACRO does not lead -- FUNDAMENTALS do," he added. Belski said that is why BMO has been prioritizing the ""improving and consistent fundamental conditions" of Canadian stocks with respect to earnings growth and revisions, operating performance, cash, and yes, themes within the bank's Canadian strategy publications and actual equity portfolios that it oversees. "After all," he added, "the stock market is a market (for) stocks - and STOCKS are NOT the ECONOMY."

"This fact has never been more prevalent in our view than the past two years in Canada. To that end, we are raising our 2025 year end price target for the TSX to 31,500 from 28,500, which implies another 6% return in the final three months of the year. Furthermore, we are raising our 2025 EPS target to 1,650 from 1,600 thanks to the broadening positive revision cycle that our models have shown over the last six months," Belski said.

Belski added: "This now positions the TSX to exhibit low double digit earnings growth by the end of 2025, implying a higher earnings multiple that is likely to remain above the long term historical average. After all, you pay for what is working -- and Canadian equities are working."

BMO still believes Canadian outperformance versus U.S. exchanges will moderate. However, Belski said, Canada is well positioned to at least keep pace with the U.S. into year end and ultimately outperform on a year over year basis by one of the widest margins on record. With its revised forecasts, BMO now expects the TSX to outperform the S&P 500 in local currency by over 8% on an annual basis this year, marking one of the strongest outperformances since 1990. In fact, only in 1993, 1999, and 2005 were years when the TSX was up double digits and outperformed the S&P 500 by over 8%.

Meanwhile, National Bank in its Monthly Equity Monitor for September and October 2025 asked: Who would have thought that a so-called trade war would fuel a worldwide equity surge with no clear losers? "We certainly didn't," it said, but added it's worth stressing that this isn't a textbook trade war. "So far," National added, "there's been little to no retaliation against Washington, meaning no escalation of inflation via second-round effects."

National Bank noted the U.S. equity risk premium is now deeper in negative territory than at any point in a generation. It said: "Resilient inflation and limited rate relief could pose risks to U.S. equities in the months ahead, particularly with valuations already stretched well above historical norms. Strong corporate profits have so far helped justify these multiples, but margin pressures could build if cost inflation persists or if tariff retaliation materializes."

The S&P/TSX, National Bank noted, broke new ground in September, climbing above 30,000 to a fresh record high, while year to date gains now exceed 20% after just three quarters, the strongest showing at this point in the year since 2009. More specifically, National noted, this record performance has been powered by a 97% surge in gold stocks so far this year. Thanks to this outsized gain, gold now accounts for just over 11% of the S&P/TSX market capitalization, the highest share since its 11.5% peak in 2012 and well above the historical average of 4.7% since the mid-1970s.

National Bank is leaving its asset mix unchanged this month after its last adjustment in June, when the bank modestly reduced its equity underweight by trimming fixed income and moving Canadian equities to overweight. It said the S&P/TSX has performed exceptionally well since then, and valuations now sit above their historical norm. "But there's room for more if the November 4 budget delivers on Ottawa's pro-business promises and if trade talks with Washington advance," the bank added.

Of commodities, gold traded higher as a key U.S. inflation measure rose last month, but matched expectations, clearing the way for another interest-rate cut from the Federal Reserve next month. Gold for December delivery was seen up $38.00 to US$3,809.10 per ounce.

Also, West Texas Intermediate rose to the highest in nearly two months as traders focus on geopolitical risk with Ukraine expanding its attacks on Russian oil infrastructure. WTI crude oil for November delivery closed up $0.74 to settle at $65.72 per barrel, the highest since Aug.4, while November Brent crude was up $0.52 to $69.94.