Quick Quiz: What would it take to get the TSX back to where it was leading in 2008?

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The overweight in oil and gas (13%) in the Canadian TSX generally helps to support the Canadian stock market at the end of each market cycle. Oil prices surge, blow up the heavily indebted global economy, then plunge again along with demand. Comparatively, only 3% of the S&P 500 is oil and gas.

With the West Texas Crude back to an eight-year high today – last seen in 2014, and before that during the commodity cycle peaks of 2008-2011 – the TSX is less negative this afternoon. than most world markets. With the S&P down nearly 8% from its December high, the TSX is down less than 2% since October.

Interestingly, currency traders are not buying the trend, with the loonie at $0.786 down against the greenback on the day, week, month and year to date.

As my partner Cory Venable has shown since 1998, after being parabolic on retail entries from 2020 to 2021, Canada’s TSX Index (which most Canadian equity funds, ETFs and equity portfolios track ) reached a precarious peak.

TSX

Few current holders appreciate how vulnerable this makes their capital. Or that a relatively modest 30% bear market from here would bring the Canadian stock market back to the 15,000 area where it peaked in oil in June 2008 – 13 years ago. And with secular support at the 12,000 area (lower line above), a 30% retracement would be a historically modest corrective cycle from here.

Who will have outperformed then? We will find out.

Disclosure: No post.

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Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.

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