The S&P 500 posted its sixth consecutive weekly gain through May 8, closing at 7,399 and notching its longest winning streak since 2024. Q1 2026 earnings season has delivered 84% of S&P 500 companies beating EPS estimates, the highest surprise rate since Q2 2021, with blended revenue growth running at 11.1%. U.S. equities have decided, collectively, that strong corporate earnings outweigh the geopolitical backdrop. The market has been making that call consistently for six weeks and has been right.
The TSX closed at 34,078 on May 9, up 0.6% on the day, with banks leading after BMO and Royal Bank both gained. Canadian equities have participated in the global rally but have lagged U.S. benchmarks meaningfully. The reason is structural: the TSX is navigating a split between energy names that benefit from war-elevated oil and rate-sensitive sectors, including financials, real estate, and utilities, that are repricing around the Bank of Canada's April 29 signal that rate cuts are off the table and a hike is possible before year-end.
What Oil Is Doing to TSX Sector Composition
The war premium on Brent crude, now near $101 per barrel after peaking at approximately $119 in March, has become the dominant structural force shaping how the TSX performs relative to both its own history and to U.S. benchmarks. Canadian Natural Resources, Cenovus, and Suncor represent a combined energy sector weight of approximately 18% of the TSX index. At war-elevated oil prices, that concentration is an advantage. Cardinal Energy posted higher first-quarter revenue on record production. Enbridge and Wheaton Precious Metals both reported Q1 results above expectations in the most recent reporting week.
The flip side is the TSX's largest sector: financials at roughly 30% of index weight. Canadian banks are contending with a rate outlook that has shifted from "cuts coming" to "hold indefinitely, hike risk emerging." The Bank of Canada's April Monetary Policy Report explicitly stated it will not allow energy-driven inflation to become persistent, and money markets are now pricing at least one 25-basis-point hike before year-end. Bank stocks face two-sided dynamics: net interest margin tailwinds from higher-for-longer rates, offset by concern about credit quality in a consumer sector being squeezed by fuel and food costs.
The CAD Anomaly and What It Signals
One of the more instructive signals in the current environment is the relative stability of the Canadian dollar, which has held near 73.4 cents U.S. despite Brent's dramatic swings from $72 pre-war to $119 at peak and back to $101 today. The Bank of Canada observed in its April MPR that the Canada-U.S. exchange rate has been "relatively stable" even as the U.S. dollar has appreciated against most other major currencies since the war began. The reason is Canada's structural position as a net oil exporter: the nation benefits from elevated energy revenue even as consumers suffer at the pump.
For the TSX, the CAD's stability removes one layer of currency volatility that typically complicates multi-asset portfolio analysis. But it does not resolve the fundamental question facing Canadian equity investors this week: is the energy premium durable, or is the TSX energy sector a long position on the war continuing longer than U.S. equity markets currently assume? The S&P 500's record high suggests U.S. investors have already looked through the war. The TSX's more modest performance suggests Canadian investors have not, and that the sector-composition split gives them less room to do so.