The S&P/TSX Composite Index is one of the main indices representing the broader Canadian stock market. Think of it as the equivalent of the S&P 500 index in the US.
Here are the S&P/TSX Composite Index (Canada) yearly returns:
| Year | Starting Price | Ending Price | Gain or Loss | Percent Gain or Loss (%) |
|---|---|---|---|---|
| 1988 | 3160.05 | 3389.99 | 229.94 | 7.28% |
| 1989 | 3389.99 | 3969.79 | 579.80 | 17.10% |
| 1990 | 3969.79 | 3256.75 | -713.04 | -17.96% |
| 1991 | 3256.75 | 3512.36 | 255.61 | 7.85% |
| 1992 | 3512.36 | 3350.44 | -161.92 | -4.61% |
| 1993 | 3350.44 | 4321.43 | 970.99 | 28.98% |
| 1994 | 4321.43 | 4213.61 | -107.82 | -2.50% |
| 1995 | 4213.61 | 4713.54 | 499.93 | 11.86% |
| 1996 | 4713.54 | 5927.03 | 1213.49 | 25.74% |
| 1997 | 5927.03 | 6699.44 | 772.41 | 13.03% |
| 1998 | 6699.44 | 6485.94 | -213.50 | -3.19% |
| 1999 | 6485.94 | 8413.75 | 1927.81 | 29.72% |
| 2000 | 8413.75 | 8933.68 | 519.93 | 6.18% |
| 2001 | 8933.68 | 7688.41 | -1245.27 | -13.94% |
| 2002 | 7688.41 | 6614.54 | -1073.87 | -13.97% |
| 2003 | 6614.54 | 8220.89 | 1606.35 | 24.29% |
| 2004 | 8220.89 | 9246.65 | 1025.76 | 12.48% |
| 2005 | 9246.65 | 11272.26 | 2025.61 | 21.91% |
| 2006 | 11272.26 | 12908.39 | 1636.13 | 14.51% |
| 2007 | 12908.39 | 13833.06 | 924.67 | 7.16% |
| 2008 | 13833.06 | 8987.70 | -4845.36 | -35.03% |
| 2009 | 8987.70 | 11746.11 | 2758.41 | 30.69% |
| 2010 | 11746.11 | 13443.22 | 1697.11 | 14.45% |
| 2011 | 13443.22 | 11955.09 | -1488.13 | -11.07% |
| 2012 | 11955.09 | 12433.53 | 478.44 | 4.00% |
| 2013 | 12433.53 | 13621.55 | 1188.02 | 9.55% |
| 2014 | 13621.55 | 14632.44 | 1010.89 | 7.42% |
| 2015 | 14632.44 | 13009.95 | -1622.49 | -11.09% |
| 2016 | 13009.95 | 15287.59 | 2277.64 | 17.51% |
| 2017 | 15287.59 | 16209.13 | 921.54 | 6.03% |
| 2018 | 16209.13 | 14322.86 | -1886.27 | -11.64% |
| 2019 | 14322.86 | 17063.43 | 2740.57 | 19.13% |
| 2020 | 17063.43 | 17433.36 | 369.93 | 2.17% |
| 2021 | 17433.36 | 21222.84 | 3789.48 | 21.74% |
| 2022 | 21222.84 | ??? | ??? | ??? |
What is the S&P/TSX Composite Index?
The S&P/TSX Composite Index is a large grouping of Canadian stocks. More specifically, it is a basket of the 230 – 250 largest Canadian stocks trading on the Toronto Stock Exchange.
Although there are roughly 1,500 companies on the Toronto Stock Exchange, the roughly 240 that are part of the S&P/TSX Composite Index account for roughly 70% of the total market capitalization of Canadian stocks (on the TSX).
The index includes a large portion of the total market capitalization trading on the Toronto Stock Exchange.
The yearly returns of the index is often referred to as the TSX Index yearly returns or the S&P/TSX Index annual returns.
The Index’s Role as a Benchmark
The S&P/TSX Composite Index serves as a benchmark in two different ways. It acts as a representation of the broad Canadian stock market when looking at the performance of Canada on a global basis.
The index also acts as a benchmark for a lot of mutual funds or ETFs in Canada, especially those targeting large-cap stocks.
Canadian large-cap mutual funds and active ETFs are usually attempting to outperform this index. Passive investments such as ETFs which track indices are usually looking to replicate the performance (before fees).
The Index’s Main Sectors
Within the S&P/TSX Composite Index, the sector with the heaviest allocation by a wide margin is financials. Other sectors with a large weighing include energy, industrials, and materials.
The index’s concentration reflects the overall state of Canada’s publicly traded market. Some of the largest companies in Canada include the major banks and other financial institutions.
The large allocation to energy reflects large Canadian oil businesses, especially across Western Canada.
When investing, be mindful that sector concentration can vary drastically between countries. While the S&P/TSX Composite Index has financials as the sector with the largest allocation, the S&P 500 Index in the US has information technology as the largest sector.
The Performance of the S&P/TSX Composite Index
Large-cap Canadian stocks have provided investors with a decent rate of return over the long term. Relative to the S&P 500, the S&P/TSX Composite Index has underperformed more often than not.
Due to the major differences in which sectors have the highest weight across both, the indices typically outperform one another at different times during a market cycle.
Strong Performance for the S&P/TSX Composite Index
The S&P/TSX Composite Index has had roughly four periods of strong market returns. These typically occur after a substantial sell-off in markets, especially here in Canada.
Periods of strong performance for the index include:
- 1995 – 1997
- 2003 – 2007
- 2009 – 2010
- 2019 – 2021 (excluding the temporary COVID-19 sell-off throughout parts of 2020)
Weak Performance for the S&P/TSX Composite Index
Market growth also comes with periods of volatility and sell-offs. The broad Canadian market has faced significant selling pressure during:
- 1990
- 2001 – 2002
- 2008
- Throughout parts of 2020 (during the COVID-19 sell-off)
Low-Cost ETFs Tracking the S&P/TSX Composite Index
Although the S&P/TSX Composite Index is not something that you can invest your money into directly, it is an index that is tracked by several ETFs in Canada.
If you are looking to have broadly-diversified exposure to large Canadian stocks, below are some great, low-cost ETFs that track this index:
- Horizons S&P/TSX Capped Composite Index ETF (HXCN.TO)
- iShares Core S&P/TSX Capped Composite Index ETF (XIC.TO)
- BMO S&P/TSX Capped Composite Index ETF (ZCN.TO)
Be mindful that these capped ETFs limit the maximum weight that a stock can have in the ETF (which is not the case for the underlying index). This may result in different weightings between the ETF and the index.
Make sure to check out our in-depth review of the iShares’ XIC ETF.
Frequently Asked Questions
What is the S&P TSX Composite Total Return Index?
The total return version of the index refers to the fact that dividends from the underlying stocks are included in the total index return.
What is the Highest the TSX has ever been in History?
The S&P/TSX Composite Index reached an all-time high of 22,213.07 in April of 2022.
What is the Largest Canadian Company?
The largest Canadian company currently by market capitalization is the Royal Bank of Canada (RY.TO).
What is the Average Return on the Canadian Stock Market?
Between 1960 and 2020, the average annual rate of return on the S&P/TSX Composite Index was 9.3% per year.
Conclusion
The S&P/TSX Composite Index is a good Canadian stock market proxy to follow in order to get a sense of how Canadian markets are doing.
While you can’t invest directly in the index, you can invest in several low-cost ETFs that focus on replicating the performance of the index.
If you are looking to build a low-cost index ETF portfolio, make sure to consider funds that also track other indices for better portfolio diversification.
