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Canadian stocks hit record highs on Thursday for the first time in nearly 11 months, officially erasing the losses of the pandemic-sparked crash in stock prices, and capping off one of the most remarkable recoveries in the country’s stock market history.

Since the lowest point of the bear market last spring, the S&P/TSX Composite Index has risen by 61 per cent, with nearly every name in the benchmark index posting positive gains over that time.

The comeback in stocks is all the more dramatic given the profound global turmoil that has persisted since the market bottomed in March, from successive waves of COVID-19 infections, which has killed more than 1.8 million people and sickened nearly 90 million worldwide, to the worst global recession since the 1930s, to the chaos that descended on the U.S. Capitol building.

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Through it all, stock markets have looked past the valley toward a semblance of normalcy somewhere on the horizon.

“The market can continue to ignore it all, if interest rates stay low,” said Brendan Caldwell, chief executive officer of Caldwell Investment Management.

“Where else are you going to put your money? French wines? Group of Seven art?”

With traditional savings vehicles offering next to nothing in returns, there is still no alternative to stocks, Mr. Caldwell said.

Rock-bottom interest rates, of course, were one key tool deployed back in the spring, when policy-makers were staring down the barrel of an economic depression. Shock-and-awe stimulus measures, including trillions of dollars in emergency fiscal and monetary spending, are widely seen as having brought an end to a brutal sell-off.

By late March, the S&P/TSX Composite, having lost 37 per cent in about a month, started to rise in concert with global stock benchmarks.

It’s been pretty much straight up since then, aside from a few notable dips.

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The rally started with pandemic beneficiaries, like Big Tech and work-from-home stocks. Growth stocks in general led the market higher for several months, as tends to happen when growth becomes a scarce commodity.

That backdrop heavily favoured the U.S. market, which is teeming with consumer-facing technology and internet companies. As a result, U.S. benchmarks made a much quicker recovery, with the S&P 500 index hitting post-pandemic highs as early as August.

While the TSX can boast of a global technology champion in Shopify Inc., which became the world’s second-largest e-commerce company in 2020 behind Amazon.com Inc., the Canadian market is still heavily weighted in natural resource sectors.

A commodity orientation proved to be both a strength and a weakness for the TSX through the recovery. The energy sector was a drag on index returns pretty much throughout, as pandemic-related lockdowns crushed oil demand, even sending crude prices into negative territory in April.

On the other hand, 2020 was a year of abundance for the forces that tend to be positive for gold – high government debt and deficits, low interest rates, a weak U.S. dollar, heightened financial market volatility, political upheaval and rising inflation expectations.

Gold hit an all-time high of about US$2,075 an ounce back in August, and currently sits at a still-elevated US$1,915.

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Since the last time Canadian stocks hit all-time highs back in February, the S&P/TSX Materials Index is up by roughly 26 per cent, while the energy sector has declined by 27 per cent over the same time frame.

Canada’s mighty banks, meanwhile, have been of little help. The Big Six lagged the stock market updraft for the bulk of 2020, weighed down by concerns over the Canadian housing market and economy, in addition to the negative impact of low interest rates on bank profits.

Then the market’s prevailing winds shifted when pharmaceutical companies started to report promising trial results for their COVID-19 vaccines.

Hopes for an economic resurgence seemed to energize value stocks and cyclical names. The TSX Diversified Banks Index has risen by about 13 per cent since early November while oil and gas stocks have also rallied, helping drive the final leg of gains needed for the TSX to reach record territory.

The rotation into value has also seen Canadian stocks close the performance gap against U.S. benchmark indexes over roughly the last two months, with the S&P/TSX Composite Index up by 9.4 per cent over that time, compared to a 7.1-per-cent gain in the S&P 500 index.

Looking ahead, there’s no reason to think stock markets can’t continue to rise despite all the challenges that remain in getting the pandemic under control, Mr. Caldwell said.

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“I think the market has already priced in that COVID is going to be with us for a long time.”

The S&P/TSX Composite Index closed up 199.46 points, or 1.12%, at 18,027.57.

Stocks on Wall Street also hit record levels on Thursday as investors bet a Democrat-controlled Congress will deliver more stimulus spending to help the U.S. economy overcome a steep pandemic-induced downturn.

The Dow, S&P 500 and Nasdaq all set new highs amid growing calls for President Donald Trump’s removal, one day after Trump supporters stormed the U.S. Capitol in a harrowing assault on American democracy.

U.S. House Speaker Nancy Pelosi urged Trump’s immediate removal from office through the 25th Amendment. President-elect Joe Biden accused Trump of fomenting violence and said Wednesday was one of the darkest days in U.S. history.

“The market is now looking past Trump and it’s looking forward to a Biden presidency, more structure and stimulus,” said Dennis Dick, a trader at Bright Trading LLC.

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“A Democratic Congress is going to obviously be more concerned about the small businesses, and the Main Street.”

Economy-linked financials jumped while industrial and materials sectors hit new records on expectations Biden will line up a bigger fiscal package and boost infrastructure spending with Congress under Democrat control.

Rate-sensitive bank shares gained, tracking another surge in the benchmark 10-year U.S. Treasury yield above 1%.

Plain vanilla growth stocks, relatively speaking, are less likely to benefit from more stimulus spending, said David Bahnsen, chief investment officer of The Bahnsen Group in Newport Beach, California.

“Overall value-type stocks probably do better than growth,” Bahnsen said. “On the margin, if they’re going to go get another $1 trillion and push bond yields higher and the slope of the yield curve steeper, banks are going to benefit.”

The S&P 500 technology index more than made up for its losses from a day earlier, when shares of some of the biggest technology companies dropped on fears of increased regulation.

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The NYSE FANG+TM index, which includes the core FAANG group of stocks that have led the Wall Street rally from pandemic lows, gained more than 2%.

Unofficially, the Dow Jones Industrial Average rose 211.66 points, or 0.69%, to 31,041.06, the S&P 500 gained 55.69 points, or 1.49%, to 3,803.83 and the Nasdaq Composite added 325.78 points, or 2.56%, to 13,066.57.

The number of Americans filing for jobless benefits unexpectedly dipped last week, while staying elevated, a Labor Department report showed, with the job market recovery appearing to stall as the COVID-19 pandemic threatens to overwhelm the country.

“With more stimulus coming, even if we do have a miss on claims, it’s going to be a little bit less severe, because we know there’s going to be a bigger back up for those who are recently unemployed,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors in Newport Beach, California.

Investors are now awaiting a comprehensive December jobs report, which is expected on Friday.

Read more: Stocks that saw action Thursday - and why

With files from Reuters

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