It’s no surprise that when the stock market is booming, it grabs everyone’s attention. When the TSX jumps 29% in a single year, as it did in 2025, it puts real money in people’s accounts and gets everyone excited about what’s next.
Months-long rallies like that aren’t typically random. They often come from real catalysts such as improving earnings, falling interest rates, sector strength, or a shift in sentiment from fear to optimism.
That’s why long-term investing is so important. Investors who are patient through tougher years and use those opportunities to buy stocks while they’re undervalued get rewarded significantly when the market booms.
Volatility
But after a 29% move, it’s natural for investors to wonder whether this is a sign that things are getting frothy.
In order to assess that, it’s crucial to understand what caused the significant jump in 2025, especially with uncertainty in the economy persisting.
And what’s interesting is that much of those gains were driven by higher volatility stocks. However, that 29% rally was also driven by strong fundamentals, not just speculation.
For example, gold and silver companies are often highly volatile stocks, and they led the way in 2025. However, gold and silver prices hit new highs, which is what lifted those resource stocks that make up a huge chunk of the TSX.
In addition, declining inflation and interest rates, two of the biggest headwinds the economy has faced in recent years, also declined.
So, although a 29% gain in the market is significant, much of that rally came from improving fundamentals and economic tailwinds.
That’s important because when gains are backed by earnings growth and cash flow, they can keep running longer than people might expect.
Source: Getty Images
Why the 29% gain looks more like a green light than a red flag
Although the price of gold and silver can fluctuate based on speculation from time to time, the breakout in 2025 came from several fundamental factors, such as increased central bank buying, geopolitical uncertainty, and persistent inflation fears. That pushed resource-heavy TSX names higher and added real weight to the index.
Of course, when gold and silver prices and the underlying miners are rising that fast, speculation jumps in too. And we’ve already seen some of that volatility in 2026 with wild swings in gold and silver prices.
That’s not the point, though. Gold and silver might have been some of the biggest gainers, but other sectors saw strong gains as well.
For example, banks saw better net interest margins after years of pressure. Many companies reported stronger earnings and raised guidance, especially as interest rate cuts started to ease borrowing costs and spending picked up.
So, although there is some risk in the market, for example, I wouldn’t be in a rush to gain exposure to gold or silver at these ultra-high prices. The entire market rallying by 29% was far from a warning sign. It was driven by improving economic conditions and sector strength, which is exactly the kind of backdrop that can support more gains ahead.
Undervalued stocks
Going forward, there is significant potential over the long term. Not only are there still plenty of stocks trading undervalued, like goeasy or Canadian Apartment Properties REIT, but several long-term trends and tailwinds are still in place.
So, although a 29% gain in a single year can naturally make investors wonder if a pullback might be coming, the rally was built on real positives like strong fundamentals, sector strength, and improving economic conditions. As long as you continue to focus on buying high-quality stocks and investing for the long haul, you’ll continue to put yourself in the best position to build meaningful long-term wealth.
