The TSX Composite index is hovering near its all-time high ahead of the upcoming Bank of Canada (BoC) interest rate decision. It was trading at C$25,420, a few points below the all-time high of C$25,790, and has jumped by over 20% in the last 12 months. So, are Canadian stocks good buys?
BoC and Fed decision
The upcoming Federal Reserve and Bank of Canada (BoC) interest rate decisions are the main catalysts for the TSX index.
Economists expect that the BoC will cut interest rates by 0.25% in this meeting, a move that may support Canadian stocks.
These cuts are necessary because of the ongoing economic slowdown. Recent data showed that the country’s economy had its slowest quarterly growth since the pandemic started.
It also showed that the headline Consumer Price Index (CPI) remained below 2% in December, even as housing costs rose.
Canada’s bond yields have crashed ahead of the BoC decision. The 10-year government bond yield dropped from 3.56% in January 2025 to 3.20%. Similarly, the five-year yield fell from 3.3% to 2.90% in hopes that the BoC will deliver more cuts.
The Canadian dollar has also continued falling this year, with the USD/CAD moving to 1.4400, down from the year-to-date high of 1.4515.
Therefore, the TSX Composite index will likely continue rising if the bank maintains its dovish tone.
The TSX 200 will also react to the upcoming Federal Reserve decision. Unlike the BoC, the Fed is expected to maintain rates unchanged because of the elevated inflation. The headline CPI moved from 2.7% in November to 2.9% in December.
Earnings season continues
The ongoing earnings season is the other major catalyst for the TSX Composite index. Top American companies like Microsoft, Apple, Amazon, and Meta Platforms will be some of the top movers for global equities this year.
Several TSX Composite companies will also publish their financial results this week, affecting the index. The most notable ones will be the Canadian National Railway, Rogers Communication, Imperial Oil, and Brookfield Renewable.
More TSX stocks will publish their earnings next week, including Constellation Software, Suncor Energy, Great-West Lifeco, and TMX Group.
A key theme in the Canadian earnings season will be the impact of Donald Trump’s tariffs on Canadian firms. He still insists that he will add tariffs, a move that may disrupt supply chains in North America.
TSX Composite index analysis
TSX chart by TradingView
The daily chart shows that the TSX index has been in a slow uptrend in the past few months and is now nearing an all-time high of $25,790. It has remained above the 50-day and 100-day Exponential Moving Averages (EMA).
The Relative Strength Index (RSI) and the MACD indicators have continued rising this year. Therefore, the path of the least resistance for the index is bullish, with the next point to watch being at $26,500. Odds of it rising will increase if it moves above the key resistance level at $25,790.
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