The S&P/TSX Composite closed Wednesday at 35,578.04, up 208.96 points, sitting within striking distance of the 35,629.89 record it set last month. The gain came on the same day U.S. Central Command carried out its eleventh consecutive night of strikes on Iranian targets, following President Trump's declaration that the ceasefire was over. West Texas Intermediate crude settled at $86.95 a barrel, its highest level in more than five weeks, while gold added $82.10 to close at $4,158.50 an ounce.
That combination, a Canadian index near its high while the conflict driving it intensifies, is precisely the setup behavioural finance research warns about. The bias at work has a name, and it explains why a client looking at a strong TSX statement this week may be drawing exactly the wrong conclusion from it.
The Availability Heuristic and the War Premium
Amos Tversky and Daniel Kahneman's research on the availability heuristic found that people judge the likelihood of an event by how easily examples come to mind, not by its actual base rate. Eleven straight nights of strikes, reported daily, make continued oil and gold strength feel close to certain. The research does not say that feeling is wrong. It says the feeling is doing more work in the decision than the underlying probability deserves.
The mechanism matters here because the TSX's gain this week was not broad. The S&P 500 closed effectively flat and the Nasdaq Composite fell 0.80% the same session, weighed down by technology names ahead of earnings from Alphabet and Tesla. Toronto's benchmark diverged from both because of what it is made of, not because Canadian markets read the geopolitical picture differently than New York.
What the Climb Is Actually Made Of
Tuesday's 408.76-point advance was led by Agnico Eagle Mines, up 4.3%, Barrick Gold, up 4.6%, and Wheaton Precious Metals, up 6.7%, alongside Canadian Natural Resources, Suncor Energy and Cenovus, each gaining more than 2%. Wednesday's further advance came from the same two sectors, base metals and energy, as commodity prices extended their climb.
WTI has held above $84 for eleven straight weeks, and the TSX energy and materials sub-indices have tracked it closely while the composite's other sectors, financials, technology, real estate, have lagged behind. That concentration is the part a strong headline index number obscures.
TSX Composite closes since mid-May trace the index's approach toward its 52-week high, and this week's three-session swing between escalation and de-escalation headlines accounts for a disproportionate share of that move.
The index's climb since mid-May has been uneven, with base metals and energy carrying most weeks and financials and technology lagging behind. Source: TMX Group daily close data.
Why Extrapolation Gets Expensive Here
The same three-session window illustrates the fragility. Monday, the TSX fell 0.86% to 34,960.32 as escalation fears dominated trading. Tuesday, it rose 1.17% to 35,369.08 on ceasefire hopes. Wednesday, it added another 0.59% as strikes resumed. Three sessions, three different narratives, and one direction of travel that happened to be up each time regardless of which story was true that day.
Terrance Odean's research on investor trading behaviour after strong recent performance found that gains reliably increase both trading frequency and portfolio concentration, precisely when diversification would do the most good. A portfolio that has drifted toward energy and gold because those two sectors carried the last three weeks was not necessarily built with a war-premium reversal in mind.
None of this means the rally is fabricated. WTI's climb and gold's safe-haven bid reflect a real, unresolved conflict. It means the index level and the diversification underneath it are telling two different stories this week, and only one of them will still be true once tonight's strikes are no longer the newest number to arrive.