04:20 PM EDT, 05/22/2025 (MT Newswires) -- The Toronto Stock Exchange on Thursday recovered from its first loss in 11 sessions a day earlier, closing with a small gain even as BMO Capital Markets believes "it will be tough for Canada to exhibit the same level of outperformance" compared to the United States over the next 12 months.

The S&P/TSX Composite Index closed up 14.84 points to 25,854.01. Among sectors, the biggest gainers were Financials, up .62%, and Information Technology, up 0.52%. Limiting gains were declines in Energy, down 0.25%, and Utilities, down 0.74%.

Dow Jones Market Data, FactSet noted yesterday that even after Wednesday's loss of 216.46 points, the TSX was up 4% month to date and 4.5% year to date, despite the threat of a global trade war since U.S. President Trump was inaugurated on Jan. 20.

Of note, Trump will attend the G7 leaders' summit in Canada next month, White House Press Secretary Karoline Leavitt confirmed in a briefing today. That news came just as G7 Finance Ministers concluded a summit of their own in Banff, Alberta, where tariffs were discussed.

Canada's Finance Minister, Francois-Philippe Champagne and Bank of Canada Governor Tiff Macklem held a press conference Thursday afternoon as the Banff summit ended. During the press conference Macklem was asked about how tricky it is to balance monetary policy issues amid all the trade uncertainty and he said: "The more we can get uncertainty down, the more we can be more forward looking."

Champagne said he "got on well" With U.S. Treasury Secretary, Scott Bessent, who attended the whole summit and was involved in a variety of discussions, including some on tariffs.

For his part, Macklem said he was encouraged by all the talk around tariffs, but added Q2 growth "will be quite a bit weaker" in Canada because of them. Macklem noted where the Canadian economy goes from here depends on what happens with tariffs.

In terms of data that might impact the BoC's rates decision in June, economist David Rosenberg today noted that Canadian producer prices deflated more than expected in April and more than 80% of the components posted declines, providing some relief after the hot CPI release. He said: "Perhaps everyone was a tad too quick to dismiss the prospect of the Bank of Canada trimming rates at the next policy meeting. After all, should we really be consumed with lasting inflation pressure at a time of shrinking employment and widening labor market slack?"

Meanwhile, maybe with the month to date and year to date gains on the TSX in mind, Brian Belski, Chief Investment Strategist at BMO Capital Markets published a 'Canadian Strategy Snapshot' assessing Canadian "outperformance."

In May 2024, Belski noted, BMO increased its Canadian weight relative to the United States. Belski said BMO's initial 'call was based on a combination of strong relative value combined with several key catalysts/contrarian indicators, suggesting to the bank that Canada was poised to outperform. Indeed, Belski noted, Canada swung from extreme underperformance in 2023 to extreme outperformance over the last 12 months. However, BMO believes Canadian stocks are now more likely to perform in line with U.S. stocks over the next 12 months.

"To be clear," Belski said, "we still believe Canada offers strong relative value, downside protection, and will continue to benefit from broadening equity performance. However, unfortunately we believe much of the "catch-up" trade that we called for last year has likely played out. This is certainly not a call to underweight Canadian equities. Instead, it reflects the sharp outperformance of the TSX as relative valuations have started to normalize, growth profiles have converged, and foreign flows have rebounded from deeply depressed levels. With most of these tailwinds likely behind us, we believe it will be tough for Canada to exhibit the same level of outperformance over the next 12 months."

"To reiterate," BMO's Belski added, "it remains our view that the U.S. is in the midst of a 25-year secular bull market and Canada is along for the ride. Yes, the recent outperformance of Canada has been largely driven by a "catch-up" trade. However, the U.S. is likely to return to its role as the primary fundamental driver of growth and ultimately re-take the leadership mantle as trade noise and risks subside."

Among highlights, Belski noted Canadian valuation advantage has narrowed. He said the spread between BMO's S&P/TSX valuation composite and the S&P 500 has narrowed sharply over the last year, from a

record spread of almost two standard deviations to under one standard deviation now. "To be clear, given sector composition and relative economic risks, we believe Canada will remain at a discount to the U.S.," Belski added.

According to Belski, Canadian earnings growth trends have now fully normalized to be back in line with the S&P 500. He said the record net foreign selling from last year has now fully reversed and is unlikely to be a core driver of Canadian outperformance going forward.

Of commodities, oil prices fell early on Thursday following a report that OPEC+ plans to again boost supply in July as it speeds the return of 2.2-million barrels per day of voluntary production cuts to market. West Texas Intermediate crude oil for July delivery was last seen down $0.72 to US$60.85 per barrel, while July Brent crude was down $0.78 to US$64.13.

Gold moved lower late afternoon on Thursday, remaining rangebound as the dollar rose and treasury yields weakened. Gold for August delivery was last seen down $23.10 to US$3,318.80 per ounce.