TSX Under Pressure: Sector Vulnerabilities and Sentiment Shifts in 2024-2025

The S&P/TSX Composite Index has navigated a turbulent landscape in 2024-2025, marked by sharp sectoral divergences and shifting investor sentiment. While the index closed 2023 with an 8% gain, driven by optimism over potential interest rate cuts, according to a CSIS analysis, the subsequent year has been defined by volatility, with the index peaking at 30,046 points in October 2025 before retreating 0.74% from its previous session, as noted in a TMX sector review. This article dissects the sector-specific vulnerabilities and evolving market dynamics shaping the TSX's trajectory.

Sector-Specific Vulnerabilities

Communication Services and Health Care: Sectors in Retreat
The Communication Services sector has emerged as a major drag on the TSX, declining 21% in 2024 amid industry-wide challenges, according to a Yahoo Finance list. While major telecom providers like Bell Canada and Telus have asserted limited direct exposure to U.S. tariffs, a BNN Bloomberg report noted other pressures persist, and the sector faces indirect headwinds. Reduced immigration-a key driver of subscriber growth-has slowed expansion, with Bell's CEO noting a marked decline in new additions since mid-2024 in the TMX sector review. Similarly, the Health Care sector erased all its 2024 gains in just two months of 2025, with half of its constituents suffering double-digit losses, per the Yahoo Finance list. Analysts attribute this to rising operating costs and regulatory pressures, compounding the sector's fragility.

Energy and Industrials: Tariff-Driven Turbulence
The Energy sector, once a pillar of the TSX's 2024 rally, has faced mounting pressure from U.S. tariffs. A 10% tariff on Canadian energy resources disrupted cross-border electricity flows, prompting Ontario to impose a temporary 25% surcharge on U.S. exports, as explained in the CSIS analysis. Meanwhile, the Industrials sector-critical to Canada's manufacturing and automotive industries-has grappled with 25% tariffs on steel and aluminum, forcing firms to seek alternative markets, according to the TMX sector review. Over 55% of Canadian exporters in these sectors report significant cost-related obstacles, underscoring the deepening structural challenges highlighted in the TMX sector review.

Market Sentiment Shifts: Bullish Optimism vs. Lingering Risks

Despite sectoral headwinds, the TSX has shown resilience, buoyed by a "risk-on" sentiment. The VIX Put/Call Ratio, a key gauge of trader positioning, hit 0.31 in September 2025, per YCharts data. This contrasts sharply with the 1.04 reading a year earlier, reflecting a sharp decline in market fear, based on YCharts data. Passive investing trends have further reinforced optimism, with index funds and ETFs outperforming actively managed portfolios, as discussed in the CSIS analysis.

However, this optimism is not universal. The Communications Services and Consumer Discretionary sectors, while up 15.8% year-to-date according to the Yahoo Finance list, remain sensitive to macroeconomic shifts. Charles Schwab's 2025 outlook cautions that elevated interest rates and U.S. tariff uncertainties could temper gains. Similarly, the Energy sector's outperformance-driven by sustained commodity prices-hinges on the assumption that global demand will outpace regulatory and geopolitical risks, a dynamic reflected in the VIX and broader market indicators.

Conclusion: Navigating a Fragmented Recovery

The TSX's performance in 2024-2025 underscores a market divided between resilient sectors and vulnerable ones. While Energy, Financials, and Technology have propelled the index to multi-year highs, the Communication Services, Health Care, and Industrials sectors highlight the fragility of Canada's export-dependent economy. Investors must weigh the current bullish sentiment against sector-specific risks, particularly as U.S. tariff policies and domestic policy shifts continue to reshape trade dynamics.