Canada's stock market witnessed a significant milestone as its main index soared to new heights on Friday. This achievement was fueled by economic data indicating a 1% annualized growth rate in the third quarter, which in turn heightened expectations for a more substantial interest-rate cut by the Bank of Canada in the coming month.

Unprecedented Growth and Rate Cut Expectations

Economic Data and Its Impact

The S&P/TSX composite index demonstrated a notable increase of 83.72 points, equivalent to a 0.33% rise, reaching 25,627.24. This upward trajectory placed it on course for its fifth consecutive monthly gain. However, the data also revealed that third-quarter gross domestic product growth fell short of the Bank of Canada's projection of 1.5%, coming in at 0.1% on a monthly basis. "It's showing a weaker than expected economy for Canada, which is not surprising for anybody living here," remarked Shiraz Ahmed, senior portfolio manager and founder of Sartorial Wealth at Raymond James. This situation reflects the complex economic landscape and the challenges faced by the nation.

Global Market Rally and Sector Performance

The TSX index was on track to achieve its biggest monthly rise in a year, with gains expected to hold. This was partly due to the global stock market rally that followed Donald Trump's election victory. Among the sectors, the materials sector witnessed a 0.6% increase as gold prices gained due to a weaker greenback and geopolitical woes. Energy Fuels led the index with a remarkable 4.6% gain, highlighting the diverse performance within the market. Trading volumes were lighter than usual as the U.S. markets were closed for half a day, adding an interesting dynamic to the trading environment.

Interest Rate Cuts and Market Sentiment

Traders now anticipate a 43.5% chance of a 50-basis-point cut at the December policy meeting, up from 30.7% seen earlier. This reflects the market's expectation of further monetary easing to boost growth, especially after inflation cooled and reached its target range. The central bank's decision to reduce borrowing costs by 125 basis points to 3.75% in its past four meetings has been a significant factor in shaping market sentiment. Despite initial investor concerns about Trump's pledge to impose a 25% tariff on imports from Canada and Mexico, the benchmark index is set to end the week in the green, demonstrating the resilience of the market.