Precious Metals Rally Reverses as Canadian Equities Face Headwinds; Market Eyes 2026 Policy Outlook

Canadian equity markets experienced a pullback on Wednesday as traders capitalized on gains from recent record-level prices in gold and silver. The S&P/TSX Composite Index declined 153.50 points, closing at 31,712.76—a 0.48% drop—as thin trading volumes reflected investors’ holiday-season caution ahead of the new week.

The retreat in precious metals triggered broader weakness across the materials sector, which has been a standout performer throughout 2025. Stocks like Endeavour Silver Corp, Aya Gold and Silver Inc, and Discovery Silver Corp posted notable declines as traders locked in profits from the year’s substantial rally. This sector-wide pressure offset modest gains elsewhere in the market, where just three of eleven sectors managed positive territory.

Trade Tensions Continue to Shape Market Dynamics

The past year has been marked by heightened cross-border trade friction. U.S. tariff measures on Canadian exports created significant headwinds for domestic businesses, though the CUSMA (Canada-United States-Mexico Agreement) has provided critical relief for many exporters. However, mounting uncertainty surrounds the pact’s renewal in 2026, with signals emerging that renegotiation efforts could substantially reshape the trade landscape.

The resilience of Canadian equities despite these pressures has been noteworthy—the TSX composite surged nearly 30% in 2025, meaningfully outpacing U.S. stock performance. The materials sector drove much of this outperformance, benefiting from both commodity strength and strategic positioning.

Central Bank Signals and Economic Backdrop

Bank of Canada Governor Tiff Macklem reiterated in recent communications that the policy rate remains appropriately calibrated, following the central bank’s December decision to maintain rates at 2.25%. This stance reflects Canada’s inflation readings tracking near the BoC’s target range alongside stable employment conditions.

Most economists anticipate the Bank of Canada will sustain its current rate level through 2026, creating a stable policy environment for investors. Simultaneously, the U.S. Federal Reserve’s December minutes revealed internal debate over future rate trajectories, with officials split between supporting additional cuts if inflation permits or holding rates steady for an extended period.

Sector Performance and Individual Stock Movements

Communications Services led gainers today, with BCE Inc and Telus Corp posting 1.36% and 1.23% advances respectively. Utilities and Consumer Staples also posted modest gains. Meanwhile, the Industrials, IT, Healthcare, and Materials sectors all retreated, with declines ranging from 0.55% to 0.86%.

Among notable movers, Dye & Durham Ltd experienced a sharper selloff, while Energy Fuels Inc and G Mining Ventures Corp emerged as significant market-moving plays. The uneven sector rotation underscores ongoing investor repositioning as the year transitions into 2026.

Absent meaningful domestic economic data releases, market sentiment remained tempered as participants weighed geopolitical uncertainties and monetary policy trajectories against the backdrop of strong 2025 performance.