The Toronto Stock Exchange has been the stronger performer so far in 2026, registering a YTD gain of +15.13% versus the S&P 500's +12.69%. Both benchmarks sit close to all-time highs and are carrying Strong Buy signals across multiple timeframes. For Canadian investors, however, the comparison is incomplete without considering the currency angle: USD/CAD at 1.3944 has weakened the loonie by +1.60% year-to-date, quietly boosting U.S. equity returns when translated into Canadian dollars and making fresh S&P purchases more costly to fund in local currency.
The Scoreboard
As of August 12, 2026, the headline performance metrics read as follows:
| Metric | TSX Composite | S&P 500 |
|---|---|---|
| Level | 36,623 | 7,751 |
| YTD Return | +15.13% | +12.69% |
| 1-Year Return | +31.19% | +20.25% |
| 6-Month Return | +12.83% | +13.44% |
| 52-Week Range | 27,802 – 36,661 | 6,317 – 7,794 |
| Distance from High | -0.1% (essentially at record) | -0.5% |
The TSX’s near-11 percentage-point lead over the S&P on a 12-month basis is significant, although the S&P has outpaced on the six-month horizon, indicating some acceleration in U.S. equities while the Canadian composite has exhibited steadier compounding over longer frames.
The Loonie Consideration
Currency movement changes the practical return for Canadian investors holding U.S. assets. With USD/CAD at 1.3944 and the Canadian dollar down about +1.60% YTD, that depreciation has acted as a tailwind: USD-denominated gains in the S&P 500 have been worth roughly an additional 1.6% when converted back into CAD so far this year.
To illustrate the asymmetry:
- If the loonie strengthens to 1.35, U.S. equity gains measured in CAD would shrink - for example, a 10% S&P move would translate to roughly a 6.5% return after currency effects.
- If the loonie weakens to 1.42, the same 10% S&P advance would expand to approximately a 13.5% return in CAD terms.
By contrast, TSX holdings carry no FX conversion exposure for domestic investors: local equity returns are realized without currency translation, removing that layer of uncertainty.
Technical Readings
Both indices show extended technical readings, particularly on monthly charts. The monthly relative strength index (RSI) and average directional index (ADX) break down as follows:
| Timeframe | TSX RSI | S&P 500 RSI | TSX ADX | S&P 500 ADX |
|---|---|---|---|---|
| Daily | 68.8 | 64.8 | 27.0 | 34.4 |
| Weekly | 73.5 | 67.3 | 49.5 | 34.2 |
| Monthly | 82.6 | 75.6 | 75.7 | 51.7 |
The TSX’s monthly RSI of 82.6 puts it deep into overbought territory, and an ADX reading of 75.7 points to a mature, well-established trend - patterns that often precede exhaustion. The S&P 500 is also overbought across timeframes but to a lesser extent. Stochastic indicators on daily and weekly charts reinforce the overbought status for both indices.
In plain terms: the primary trend remains intact, yet much of the low-hanging upside may already be priced in. A short-term pullback in the range of 3-5% on either index before the next leg higher would be consistent with these signals and should not be surprising.
Why Sector Mix Matters
The two markets are driven by different sector concentrations, which dictates how macro developments will affect returns:
- TSX: Heavy allocation to financials, energy and materials. These sectors tend to benefit from higher commodity prices and a resilient domestic banking system. Energy represents roughly 20% of the TSX, making oil price moves particularly influential. Brent crude is trading near $90 a barrel amid Strait of Hormuz tensions, a backdrop that supports Canadian energy names.
- S&P 500: Dominated by technology and AI-related infrastructure. The index has been buoyed by record earnings from AI-focused companies and continued acceleration in AI capital expenditures.
Current macro signals - geopolitical friction supporting oil, cooling U.S. inflation with CPI around 3.4% year-over-year, and sustained AI capex growth - are simultaneously favorable to both index compositions. That coexistence of supportive drivers is notable.
Framework for H2 2026
For Canadian investors choosing between a heavier TSX allocation and greater S&P 500 exposure, consider these scenarios:
- Lean toward the TSX if you expect oil to remain elevated above $85, if the loonie stabilizes or strengthens (removing the FX advantage of U.S. holdings), or if you prefer lower volatility and no currency conversion costs.
- Favor the S&P 500 if you believe AI-driven earnings growth will continue to outpace other sectors, if the loonie remains weak or weakens further (which amplifies USD returns in CAD), or if you seek higher growth optionality via technology exposure.
- Consider a blended approach: core TSX positions to capture income and commodity exposure, paired with S&P 500 holdings to access tech and AI growth — a barbell that diversifies both sector and currency risk. The narrowing 6-month gap - TSX +12.83% vs S&P +13.44% - underlines why a mix may capture both momentum and sector diversification.
Key Risks and Watchpoints
- Escalation in the Strait of Hormuz could push oil above $100 a barrel - a net positive for TSX energy and materials but a potential negative for the S&P via higher inflationary pressure.
- Divergence in the timing and magnitude of rate cuts between the Bank of Canada and the U.S. Federal Reserve would move USD/CAD and materially affect cross-border returns for Canadian investors.
- The TSX’s monthly RSI above 80 has historically been followed by a modest correction - on the order of 2-4% within the next four to six weeks - which is a short-term technical risk to monitor for domestically focused portfolios.
Any allocation decision should account for the interaction of sector exposure and currency moves, rather than viewing index performance in isolation.